ICBA supports federal actions to mitigate nonbank risks

ICBA said it supports several federal actions announced Friday that will help mitigate the risks posed by special-purpose depository institutions and digital assets.

Custodia Denial: The Federal Reserve announced it denied Custodia Bank’s application to become a member of the Federal Reserve System, and the Federal Reserve Bank of Kansas City reportedly denied its application for a master account. Custodia—a special-purpose depository institution chartered by the state of Wyoming—does not have federal deposit insurance and proposed to engage in novel and untested crypto activities.

Fed Policy Statement: The Fed also issued a policy statement clarifying that its regulatory limitations apply to both insured and uninsured depository institutions to “promote a level playing field for all banks with a federal supervisor.” It notes that crypto activities—such as issuing stablecoins on decentralized networks—is “highly likely to be inconsistent with safe and sound banking practices.”

White House Statement: Separately, the White House issued a statement calling for a broader policy response to digital assets, citing misleading claims about crypto-assets being insured by the FDIC, misuse of investor assets, and the need for stronger law enforcement over crypto firms.

ICBA Response: ICBA said the statements reflect community bank advocacy. In a national news release, ICBA President and CEO Rebeca Romero Rainey said:

  • The Fed’s actions appropriately safeguard the banking system from the risks posed by institutions with novel charters and from the crypto sector, reflecting ICBA concerns laid out in recent comments on accessing Fed master accounts.

  • The White House’s statement calling for a broader policy response to crypto-assets echoes ICBA’s long-standing calls for policymakers to develop a clear regulatory framework for crypto, to focus on crypto’s role in facilitating financial crimes, and to ensure the traditional banking system continues to be a safe haven from the crypto sector’s instability.

Key Risks: “Policymakers should prioritize protecting national security amid ongoing instability in the crypto markets while collaborating on a comprehensive regulatory framework that utilizes more effective alternatives to a U.S. central bank digital currency — including the FedNow instant payments service,” Romero Rainey said.

Feedback Request: The White House announcement also cites a request for information from the Office of Science and Technology Policy on a National Digital Assets Research and Development Agenda. The administration said R&D “will help the technologies powering cryptocurrencies protect consumers by default” and could help stakeholders understand the implications of a U.S. CBDC, which ICBA opposes. ICBA plans to respond by the March 3 comment deadline.