The US Commodity Futures Trading Commission (CFTC) and the Federal Deposit Insurance Corporation (FDIC) have lifted restrictions on banks concerning cryptocurrency that were established during the administration of former President Joe Biden. The FDIC has declared that financial institutions it supervises no longer require prior consent to engage in crypto-related activities. Meanwhile, the CFTC has indicated that crypto derivatives will be treated in the same manner as other derivatives in the United States. These actions reflect a broader effort by US authorities to motivate traditional financial institutions to consider the potential applications of cryptocurrencies.
### Shift Towards a Pro-Crypto Stance
Under the administration of President Donald Trump, the United States is adopting a more favorable stance towards cryptocurrency. The US Securities and Exchange Commission (SEC) has initiated a dedicated Crypto Task Force to develop comprehensive regulations for the Web3 sector. Furthermore, the federal government is actively pursuing ways to integrate traditional financial systems with the rapidly changing cryptocurrency landscape.
### Clarifying the FDIC’s Update
The FDIC, an independent government agency aimed at enhancing the financial stability of the United States through deposit insurance and consumer protection, announced on March 28 that banks under its jurisdiction are permitted to engage with cryptocurrency and digital assets, provided they manage risks effectively and comply with existing regulations. This marks a significant shift, allowing banks to offer services related to crypto custody, hold stablecoin reserves, participate in blockchain settlement systems, and issue digital assets.
In its statement, the FDIC emphasized that institutions under its supervision can participate in approved crypto-related activities without needing prior FDIC authorization. However, they must still evaluate the associated risks, which include market volatility, operational and cybersecurity challenges, consumer protection obligations, and anti-money laundering regulations. Acting FDIC Chairman Travis Hill had previously indicated the need for these regulatory changes in February, supported by a 790-page document containing requests from the banking industry for a relaxation of these restrictions. This move is anticipated to enable US banks to further explore the burgeoning $2.7 trillion cryptocurrency market.
### CFTC’s New Regulations for Crypto Derivatives
The CFTC, which oversees the derivatives markets in the US, has also made significant announcements regarding digital asset derivatives. This agency is tasked with safeguarding investors from market manipulation and fraud. Recently, the CFTC clarified that digital asset derivatives will now be legally recognized in the same category as futures, options, and swaps. Derivatives are financial instruments that derive their value from underlying assets such as stocks, bonds, and commodities.
In its announcement, the CFTC confirmed that its division responsible for Clearing and Risk will ensure that the regulatory framework for digital asset derivatives aligns with that of other financial products. This approach aims to maintain fair market conditions, encourage broader participation, and ensure ongoing risk assessments.
### The US Crypto Strategy Under Trump
These recent changes come in the wake of the inaugural Crypto Summit held at the White House on March 7, which gathered leaders from the cryptocurrency sector and US regulators to explore methods for fostering growth in the industry while adhering to legal standards. Before the summit, President Trump established a strategic Bitcoin reserve and a crypto stockpile for the United States. According to his executive order, Bitcoin and alternative cryptocurrencies confiscated by federal agencies during investigations will be held in these reserves as long-term investments.
As the 47th President of the United States, Donald Trump has expressed a commitment to positioning the country as the global leader in cryptocurrency. Following his electoral victory, the SEC dismissed numerous legal actions against cryptocurrency firms that had been initiated under the Biden administration. The Crypto Task Force has been directed to present a preliminary draft of their proposed crypto regulations by August of this year.
