The Federal Deposit Insurance Corporation (FDIC) announced on Friday that banks are no longer required to seek permission to engage in digital assets, reversing a 2022 policy used to curtail bank involvement in cryptocurrencies and blockchain-based payments.

The decision marks a significant shift in the regulatory landscape, responding to concerns that prior restrictions stifle innovation in the financial sector.

However, while the FDIC has loosened its stance, the Commodity Futures Trading Commission (CFTC) simultaneously withdrew separate digital asset guidance, raising questions about how far regulators should go in accommodating the crypto industry.

Recent disclosures from FDIC documents, obtained through a freedom of information request litigated by Coinbase, revealed that banks were not only required to request permission for digital asset activities but were actively discouraged from participating in them.

The FDIC’s latest move seeks to rectify this and aligns with calls from banking associations for clearer and more consistent regulatory policies. However, the agency maintains that all digital asset activities must still be conducted in a “safe and sound manner,” and it is currently reviewing related joint guidance issued in 2023 in collaboration with the Federal Reserve and the Office of the Comptroller of the Currency (OCC).

Meanwhile, the CFTC rescinded two key documents related to digital assets, raising concerns about the potential risks of deregulation. One of the documents, a 2018 advisory, had mandated reporting requirements for trades exceeding five Bitcoins. The CFTC justified its withdrawal by citing market maturation and increased experience in handling virtual currency derivatives.

However, its decision to rescind a 2023 guidance on derivatives clearing has been met with skepticism. This guidance had underscored cybersecurity risks associated with physically settled crypto derivatives, an area of concern given the heightened vulnerabilities of digital assets compared to traditional commodities like oil. The CFTC’s rationale for its withdrawal was to ensure that digital asset derivatives are treated consistently with other financial products, but critics argue that the unique risks of crypto warrant specific safeguards.

The divergence in regulatory approaches highlights the ongoing debate over how best to oversee digital assets. While the SEC recently rescinded its controversial SAB 121 staff accounting bulletin—which had effectively prevented banks from offering crypto custody without congressional approval—it provided an alternative risk-management framework rather than eliminating oversight entirely.

In contrast, the CFTC’s decision to rescind guidance without a clear alternative raises concerns about whether regulators are stepping too far back from their oversight responsibilities.

Editorial Note: This news article has been written with assistance from AI. Edited & fact-checked by the Editorial Team.

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