The payments landscape for community banks is changing rapidly as traditional payments converge with new instant payment systems and emerging cryptocurrencies. It is critical for Community Banks to maintain awareness of developments in the payments space to assess new opportunities, mitigate risks, and ensure that their payment strategy aligns with overall business plans.
Feb. 13, 2023
Federal Reserve Governor Christopher Waller said banks engaging with crypto customers should be “very clear” about the customers’ business models, risk-management systems, and corporate governance structures to ensure the bank is not left “holding the bag if there is a crypto meltdown.”
Waller Speech: At a conference on crypto, Waller said banks considering engaging in crypto-related activities face a critical task to meet know-your-customer and anti-money laundering requirements. “I'm supportive of prudent innovation in the financial system, while at the same time concerned about banks engaging in activities that present a heightened risk of fraud and scams, legal uncertainties, and the prevalence of inaccurate and misleading financial disclosures,” he said.
PayPal Stablecoin Delay: Waller’s remarks came the same day that PayPal said it is pausing its work to introduce a stablecoin. Bloomberg reported that PayPal had hoped to debut the stablecoin in the coming weeks but is delaying that work to better understand the changing regulatory landscape.
Federal DeFi Warning: Earlier in the week, the federal Office of Financial Research released a blog post warning of the threats decentralized finance poses to financial stability. The OFR said digital asset price declines could spill over into traditional financial markets, among other concerns.
Senate Hearing: The Senate Banking Committee is scheduled to meet tomorrow on the crypto crash and why financial system safeguards are needed for digital assets.
ICBA Views: In a recent Medium op-ed, ICBA President and CEO Rebeca Romero Rainey continued ICBA’s call for policymakers 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.