Fed, White House work to mitigate crypto risks in financial system

The Federal Reserve and White House offered insights into how they are working to mitigate cryptocurrency risks in the financial system with several releases Friday. The Fed issued a policy statement to promote a level playing field and announced it denied Custodia Bank’s application to become a member of the Federal Reserve, while the White House released a roadmap on crypto risks.

The White House “Roadmap to Mitigate Cryptocurrencies’ Risks” has the potential to impact a broad range of entities that are offering or planning to offer digital asset related products. It directs that legislation should not “greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets.” The statement also suggests Congress might act to “strengthen transparency and disclosure requirements for cryptocurrency companies so that investors can make more informed decisions about financial and environmental risks.”

In addition, the Biden Administration is expected to soon release priorities for digital assets research and development. While NAFCU is supportive of a clear regulatory framework for cryptocurrency and other financial technologies, the association has consistently opposed the creation of a central bank digital currency, arguing that the costs outweigh the benefits and that credit unions represent a superior and safer alternative for advancing financial inclusion goals and promoting affordable access to payments. The association has shared its concerns with the Fed, Treasury, Commerce Department, and Congress.

The Fed’s policy statement applies primarily to banks since it concerns section 9(13) of the Federal Reserve Act, which gives the Fed the authority to prohibit or otherwise restrict state member banks and their subsidiaries from engaging as principal in any activity that is not permissible for a national bank, unless the activity is permissible for state banks under federal law.

 

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