By Echo Wang

LAS VEGAS, Reuters – The top U.S. regulator for banking said that the U.S. wants to make it easier for banks to offer cryptocurrencies to their customers. This is in an effort to maintain control of this rapidly-developing asset.

Jelena MacWilliams (chair of the Federal Deposit Insurance Corporation) told Reuters Monday in an interview that a group of U.S. regulators was trying to give banks a guideline for engaging with crypto assets.

This could mean clearer guidelines for holding cryptocurrency in custody, allowing clients to trade them, lending them collateral, and even storing them on client balance sheets as traditional assets.

In an interview, she stated that “we need to permit banks in the space while appropriately managing management and mitigating risks.” She spoke out on the sidelines a Fintech Conference.

“If it’s not brought in to the banks, this activity will grow outside the banks. The federal regulators won’t be able to regulate it.” The Federal regulators will not be able regulate it.

McWilliams’ comments provide the fullest picture yet of what regulators are exploring as part of a cryptocurrency “sprint” team first announced https://www.reuters.com/technology/fed-occ-fdic-sprint-regulation-crypto-quarles-says-2021-05-25 in May. This team’s goal was to coordinate cryptocurrency policies among the U.S. banks regulators FDIC, Federal Reserve, and Office of the Comptroller of the Currency.

A murky regulatory landscape has developed in America due to the rapid rise of cryptocurrency. Under previous leadership, the OCC took an aggressive approach to bringing cryptocurrency into banks, including blessing https://www.reuters.com/article/us-usa-banks-cryptocurrency/u-s-banks-given-regulatory-green-light-to-safekeep-cryptocurrencies-idUSKCN24N2HI bank custody services for cryptocurrency, while other agencies were slower to act.

Acting Comptroller Michael Hsu said that those decisions were currently under review.

Some banks are already exploring these fields without regulatory clarity. Earlier this month, U.S. Bancorp announced it was launching https://www.reuters.com/business/finance/us-bancorp-launches-cryptocurrency-custody-service-investment-managers-2021-10-05 a cryptocurrency custody service for institutional investment managers.

McWilliams comments suggest that the Trump Administration’s Republican holdover is still looking for a way to integrate cryptocurrency in traditional bank supervision.

“My goal in this interagency group is to basically provide a path for banks to be able to act as a custodian of these assets, use crypto assets, digital assets as some form of collateral,” McWilliams said on a conference panel.

“At one point in time we will address how banks can keep them on their balance sheets under any circumstances.”

McWilliams recognized the difficulties.

It would be easiest to convince regulators that a protocol is in place to provide custody for crypto assets. She said that it was difficult to determine how volatile assets can be used as collateral or included on banks’ balance sheets.

McWilliams explained that “the issue there is…valuation of these assets as well as the fluctuation in value that can almost be on a daily basis.” It is up to you to determine the capital and liquidity treatment that should be given to these balance sheet holdings.