FDIC U-Turn: Embracing Crypto, Scrubbing Past Restrictions

The Federal Deposit Insurance Corporation (FDIC) has announced a significant shift in its regulatory approach to cryptocurrency-related activities. In a statement released today, Acting Chair Travis Hill revealed that the FDIC is actively reevaluating its supervisory approach to crypto-related activities, including replacing Financial Institution Letter (FIL) 16-2022 and providing institutions with a pathway to engage in cryptocurrency and blockchain-related activities while adhering to safety and soundness principles.

This move signals a departure from the FDIC's previous stance, which was outlined in FIL 16-2022. The letter, released in 2022, imposed strict limitations on banks' relationships with the cryptocurrency industry, prohibiting certain services such as cryptocurrency custody, trading, financing, and other activities. The release of this document was seen as part of the "Choke Point" policy aimed at curtailing the expansion of the cryptocurrency industry by restricting cryptocurrency companies' access to banking services.

In a notable development, the FDIC has removed the original FIL-16-2022 letter from its website, and the link now shows a 404 error. This action suggests that the FDIC is scrubbing evidence of policies that contradict its new political motivations regarding cryptocurrency. MartyParty, a crypto KOL, commented on the removal of the letter, indicating that the FDIC is actively reevaluating its stance on cryptocurrency-related activities.

In addition to the regulatory shift, the FDIC is planning to revise its cryptocurrency guidance to allow banks to engage in certain cryptocurrency activities. Bank officials are meeting to discuss cryptocurrency custody and tokenized deposits, indicating a potential expansion of banking services in the cryptocurrency sector. This move could open up new opportunities for banks to engage with the cryptocurrency industry while adhering to safety and soundness principles.

The FDIC's release of 790 pages of crypto-related letters further underscores its regulatory pivot. The documents show that requests from banks and other institutions to offer crypto services to clients were almost always met with resistance, delays, constant requests for more information, and pause letters. However, the FDIC's Acting Chairman Travis Hill has indicated that the agency is looking forward to reevaluating its supervisory approach to crypto-related activities, marking a significant shift in the government agency's stance