#2023-1, January 6, 2023

Joint Statement on Crypto Risk-Assets to Banking Organizations

On Wednesday, January 4th, the Federal Reserve, FDIC, and the OCC (collectively, the Agencies) issued a statement on crypto-asset risks for banks and financial institutions.  As you know, the past year has demonstrated significant market volatility for crypto-assets, with the exposure of vulnerabilities in valuation as well as good faith business practices by crypto-asset organizations.

The Agencies this week issued a joint statement that highlights several key risks – from their perspective – associated with crypto-assets and third parties working with crypto-assets for banks and financial institutions.  The Agencies didn’t specifically identify singular trigger events, such as the recent FTX collapse; but instead directs banks and executives to familiarize themselves with key risk indicators and signs for “significant volatility and the exposure of vulnerabilities” in this market sector.  Fraud and scam, legal uncertainties on customer habits and ownership rights, and the clear lack of maturity in risk management best practices for crypto-assets are discussed in the joint statement.

While MBA and other financial trade associations have concerns about regulatory overreach, we are pleased that this brief statement does not expressly forbid banks from engaging in innovation in the crypto-asset space.  The agencies do express “significant” safety and soundness concerns with business models concentrated in crypto-related assets or activities; as such, MBA would recommend that members continue best practices in communication and outreach to their regulatory agency contacts throughout the year.

To read the joint statement, please click here.

McCarthy Approaching Successful Speaker Vote After 13 Attempts

The 118th Congress officially began its work this week with the swearing-in of new United States senators and the convening of the House Assembly to determine the Speaker.  At press time, Kevin McCarthy has been nominated 13 times and failed in each attempt to secure the necessary 218 votes.  Notably, the US has not observed multiple votes for House Speaker in almost a full century.  Votes remain ongoing today, and the timeline remains unclear for Mr. McCarthy (R-CA) to secure control of the Speakership.  Republicans made significant progress this week as Mr. McCarthy netted 214 total votes in the 13th round of voting, up from 202 on Tuesday, the 4th.  Republican leadership has made several concessions to their holdout members, but specific reporting on the agreements remains in flux.

One crucial piece of information is known today, and it relates to the process to raise the US debt ceiling this summer.  GOP leadership appears to have made concessions to holdout members related to control and input on debt ceiling negotiations.  Negotiations on the US debt ceiling, and funding of the federal government will therefore be particularly fraught.  The decision to lift the country’s debt limitations has significant financial market implications should the US government default on its debts – even for a brief period.  The Association, and its partners across the country, will continue to monitor negotiations over must-pass legislation as well as banking and financial services legislative priorities at the national level.  It does not appear that negotiations between Mr. McCarthy and the Republican party’s holdout members have resulted in any reported changes to the structure of banking and financial services committees today.

Biden Administration Issues Fall 2022 Semiannual Regulatory Agenda

Earlier this week, the Biden Administration issued its Fall 2022 Semiannual Regulatory Agenda.  The agenda is listed current as of September 30, 2022, and discusses a variety of projects, rulemakings, and initiatives that the agencies are coordinating for the next six months.  Most notably, the OCC, FDIC, and Federal Reserve project that a “joint final rule to modernize the Community Reinvestment Act Regulations” should be issued in March 2023.

To read the Department of Treasury’s full statement on regulatory priorities, please click here.