The FDIC in the United States is developing a more lenient framework for banks participating in encryption asset activities.

The Federal Deposit Insurance Corporation (FDIC) is developing a more relaxed and transparent framework for U.S. banks to engage in encryption asset activities, including the use of public, permissionless blockchains.

On April 8, FDIC Acting Chairman Travis Hill delivered a speech at a banking industry summit, outlining the agency's evolving stance on encryption-related activities.

Public Blockchain Interaction Guidelines

A key area under review involves the interaction between regulated banks and public, permissionless blockchains. Hill acknowledged that while regions outside the United States have allowed banks to use public chains for many years, U.S. regulators have taken a more cautious approach.

The FDIC now believes that a complete ban on the use of public blockchains is too strict. However, Hill emphasized the need for appropriate safeguards to regulate such activities. The agency is evaluating existing inter-agency guidance to establish enduring standards for the responsible use of public networks.

The question of whether public chains can operate in a permissioned mode is also under consideration. Hill stated that regulators must assess how to define and regulate blockchain configurations that blur the lines between open and permissioned environments.

The FDIC will issue further guidance.

The FDIC stated that it plans to issue more guidance on specific digital asset use cases. Hill stated that the agency will continue to evaluate unresolved issues related to the scope of encryption-related activities, regulatory treatment of blockchain-based products, and the risk management expectations of banks operating in this area.

The broader goal is to establish a consistent and transparent regulatory framework that promotes innovation while ensuring compliance with safe and robust standards.

Hill recently pointed out that the agency's revised guidelines represent a fundamental shift in the way the U.S. banking system treats encryption assets and blockchain technology. He emphasized that the FDIC has withdrawn its previous requirement for regulated institutions to notify the agency before engaging in digital asset and blockchain activities.

Stablecoin Regulation and Deposit Insurance Framework

Hill also discussed the emerging issues surrounding stablecoins, particularly the legislative trends proposed by Congress. The FDIC is reviewing potential updates to deposit insurance regulations to clarify the eligibility requirements for stablecoin reserve deposits. Key issues being assessed include liquidity risk management, safeguards against illicit finance, and cybersecurity standards.

The FDIC is now considering whether to further clarify the boundaries of permitted activities in this area or to expand regulatory guidance to cover more use cases.

Tokenized Deposits and Smart Contract Risks

The speech also emphasized the need for clearer regulatory treatment of tokenized real-world assets and liabilities (including tokenized commercial bank deposits). Hill stated that the FDIC believes that "regardless of the technology or record-keeping method used, a deposit is a deposit."

However, he expressed concerns about whether counterparties could use smart contracts to withdraw funds at face value after the bank's collapse, as this could increase liquidation costs if there are no safeguards to prevent such outflows.

This concern is driving internal efforts within the FDIC to assess technological solutions to prevent unexpected outflows of funds in bank resolution scenarios. Hill pointed out that the challenge lies in reconciling on-chain programmability with traditional regulatory safeguards designed to ensure the orderly liquidation of failed institutions.

These changes by the FDIC mark its official move towards providing regulatory clarity for banks exploring digital asset infrastructure, while emphasizing the need for prudent risk control and further clarification of permissible activities.