Just days after U.S. banks were informed they could legally hold stablecoin reserves for customers, the director of enforcement agency FinCEN warned banks about their crypto risk exposure.
Taken together, the encouraging letter from acting Comptroller of the Currency Brian Brooks and stark warning from Financial Crimes Enforcement Network Director Kenneth Blanco present a very mixed message to banks and other financial institutions. Both agencies are part of the U.S. Treasury Department.
Blanco’s Sept. 29 warning came in a speech to anti-money-laundering (AML) association ACAMS, in which he discussed compliance issues.
“To be clear, exchanges are not the only ones with crypto risk exposure. These risks are not unique to money services businesses or virtual currency exchangers.” Blanco added:
“Banks must be thinking about their crypto exposure as well. These are areas your examiners, and FinCEN, will ask you about when assessing the effectiveness of your AML program.”
Pointing to issues like the effectiveness of know-your-customer (KYC) and AML tools in place, how the bank interact with emerging payment systems, and even if they have institutional or peer-to-peer virtual currency customers, Blanco warned:
“If banks are not thinking about these issues, it will be apparent when examiners visit.”
A positive outlook
The FinCEN director’s comments come on the heels of Brooks’ Sept. 21 letter clarifying that “national banks and federal savings associations may hold ‘reserves’ on behalf of customers who issue stablecoins, in situations where the coins are held in hosted wallets.”
The clarification from Brooks was preceded by a July 21 interpretive letter in which the Office of the Comptroller of the Currency clarified that banks may custody cryptocurrencies on behalf of customers.
A former chief legal officer at the Coinbase exchange, Brooks took that opportunity to reaffirm “the OCC’s position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.”
This represented a “seismic development for crypto holders in the U.S.,” said cryptocurrency custodian Digivault’s CEO, Robert Cooper, at the time.
The positive outlook on the cryptocurrency business isn’t just coming from federal agencies. On Sept. 1, Senate Banking Committee Chairman Mike Crapo (R-ID) called cryptocurrencies’ innovations “inevitable and beneficial.”
The U.S., he added, “should develop clear rules of the road that protect businesses and consumers without stifling future innovation.”