The U.S. Federal Deposit Insurance Corporation (FDIC) does not have a fully formed strategy to address risks from cryptocurrency exposure at banks, according to an evaluation by the regulator’s inspector general.
In a redacted report published this week, the FDIC’s Office of Inspector General (OIG) found shortcomings in the agency’s approach to emerging crypto-related risks.
The OIG said that while the FDIC has started developing responses, it “has not yet completed a risk assessment to determine whether the Agency can sufficiently address crypto-asset-related risks.”
Specifically, the FDIC was advised to formally document its risk assessments, evaluate their significance, and establish mitigation strategies such as industry guidance.
The regulator, which provides deposit insurance for banks, adopted a “bottom-up” crypto risk strategy in early 2022 focused on gathering information from supervised institutions.
This included sending letters asking banks about crypto exposure and providing case-by-case feedback. Parts of the report detailing institution responses were redacted.
But the OIG said the FDIC’s process for following up on the letters was unclear, with no defined timeline or endpoint.
The watchdog issued two recommendations for the FDIC to improve its crypto risk approach that the agency agreed with. The FDIC plans to implement corrective actions by the end of January 2024.
Federal inspectors generally routinely audit and evaluate policies at agencies to promote effectiveness and accountability.
The OIG’s findings underscore the challenges regulators face in formulating comprehensive responses to rapidly evolving crypto risks.
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