US CFTC, FDIC Revoke Crypto-Related Restrictions for Banks: All Details

The US Commodity Futures Trading Commission (CFTC) and the Federal Deposit Insurance Corporation (FDIC) revoked crypto-related restrictions that were levied on banks during former President Joe Biden's administration. The FDIC has announced that financial institutions under its oversight no longer need prior approval to dabble in crypto-related activities. The CFTC, on the other hand, stated that crypto derivatives will be regulated the same way other derivative products are regulated in the US. Through these developments, the US authorities aim to encourage traditional financial institutes to explore crypto use-cases.

Under President Donald Trump, the US is taking a pro-crypto approach. The US SEC has formed a special Crypto Task Force to draft detailed regulations to govern the Web3 industry. Additionally, the federal government is actively working to bridge traditional financial systems with the evolving world of cryptocurrencies.

Understanding FDIC's Announcement

The FDIC describes itself as an independent government-backed agency established to promote the financial stability of the US through deposit insurance and consumer protection initiatives.

On March 28, the agency announced that banks supervised by the FDIC can work with crypto and digital assets, as long as they properly manage risks and adhere to existing regulations.

Essentially, the agency has given a green light to the banks to offer crypto custodian services, maintain stablecoin reserves, participate in blockchain-based settlement systems, and issue digital assets.

“FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior FDIC approval. As with all other activities, FDIC-supervised institutions should consider the associated risks—including, but not limited to, market and liquidity risk; operational and cybersecurity risks; consumer protection requirements; and anti-money laundering requirements,” the agency said in its statement.

Acting FDIC chairman Travis Hill had first spoke about making these regulatory changes in February. At the time, Hill had presented a 790-page document featuring letters from the US banking sector – urging for an ease in these restrictions.

This development is expected to help US banks explore the crypto industry – that currently stands at the valuation of $2.7 trillion (roughly Rs. 2,31,17,305 crore).

Here's What the CFTC Announced

The CFTC is also a government agency that governs the US derivatives markets. The agency is responsible for protecting investors against manipulation and scams.

Over the weekend, the CFTC clarified that digital asset derivatives will be legally treated the same as futures, options, and swaps. Derivatives are financial tools that “derive” their value from underlaying assets like stocks, bonds, and commodities.

In its announcement, the CFTC noted that its division of “Clearing and Risk” will “ensure that it does not suggest that its regulatory treatment of digital asset derivatives will vary from its treatment of other products.”

This implies that the CFTC will align crypto derivatives in accordance with its policies to maintain fair markets, encourage participation, and conduct regular risk assessments.

US' Crypto Roadmap Under Trump

These fresh developments follow the first Crypto Summit hosted by the White House on March 7. The event brought crypto leaders and the US regulators under one roof to discuss ways to grow the sector without compromising on legal requirements.

Prior to the Crypto Summit, President Trump created a strategic Bitcoin reserve as well as a crypto stockpile in the US. As per his executive order, Bitcoin and altcoins seized by federal agencies during investigations will be put into these reserves as long-term holdings.

As the 47th President of the US, Donald Trump promised to transform the US to the crypto capital of the planet during his campaigning days. Following his victory in the elections, the SEC dropped a plethora of legal cases against crypto firms that were levied under the Biden administration.

The Crypto Task Force has been instructed by the President to submit a first draft of their proposed crypto guidelines by August this year.