Understanding the FDIC’s Role with Crypto

The Federal Deposit Insurance Corporation (FDIC) isn’t just guarding your piggy bank; they’re also trying to keep up with the fast-paced world of crypto. In early 2022, the FDIC’s Office of the Inspector General (OIG) decided it was about time to dive into the deep, turbulent waters of crypto asset risk.

Bottom-Up Approach: What Does It Mean?

So, what exactly is a “bottom-up” approach? Think of it like piecing together a jigsaw puzzle — the FDIC wanted to analyze the crypto-related activities of various institutions piece by piece. They sent out a letter to these institutions, asking about their crypto dealings. By January 2023, 96 institutions expressed interest or revealed their current crypto shenanigans.

Crypto Risk Assessment: Still a Work in Progress

Here’s where it gets interesting (or concerning, depending on how you feel about it). The OIG mentioned that while the FDIC began to dabble in crypto risk strategies, they hadn’t fully assessed the significance and potential impact of these risks. Basically, it’s like throwing spaghetti at the wall to see what sticks without really understanding how much sauce is gonna hit the floor.

Feedback Process: A Maze with No Exit

For institutions, the feedback process from the FDIC was anything but straightforward. The OIG emphasized that there were no clear timelines for reviewing submissions or finishing the feedback loop. It’s like a never-ending echo chamber of uncertainty for banks trying to navigate the gravy train of crypto.

Recommendations and Path Forward

The OIG made two recommendations to improve this confusion and outlined that the FDIC had already agreed to them. They’re expected to wrap things up by January 2024. So, while the FDIC is on the path to better manage crypto asset risks, they still have quite the road ahead.

“The Agency has not yet completed a risk assessment…”

Cue the dramatic music! But fear not, the FDIC is on board with plans to develop strategies and document all this mutter about risks — you know, just in case things go sideways. And as the world of crypto shifts like quicksand, these strategies need to adapt faster than a cat jumping off a hot tin roof.