utah.bank 12 SWOT-ING AT THE CRISSCROSSING CRYPTO CRACKDOWN By Theo Kelly, Associate General Counsel, Compliance Alliance INTRODUCTION In the 14 years since blockchain technology’s invention, banks have been left to compete with emerging business models and new stores of value, while operating in an uncertain vacuum of regulatory guidance. The resulting whiplash of lightningfast innovation seemingly incapacitated the U.S. regulators of currencies, commodities, and securities. With only crisscrossing guidance offered thus far, it may seem impossible to make a risk-based decision on whether, and to what extent, a bank should adopt blockchain technology, including cryptocurrency and web3. However, using the triedand-true SWOT analysis, banks can establish a baseline with which to evaluate the impact the crisscrossing crypto crackdown will have on their internal and external environment. First, a refresher on the more recent commentary and actions by banking regulators. We know that Basel will be releasing a second consultation later this year with an eye on a “global minimum prudential framework” to address risks associated with crypto assets. Their first consultation offered a riskweighting methodology. The U.S. Office of the Comptroller of the Currency (OCC) confirmed in July 2020 that national banks could offer crypto custodial services. However, Acting Comptroller Chu recently publicly remarked that it is time to ‘reset and recalibrate’. The Federal Reserve Board (FRB) hasn’t released much guidance other than to say they will be releasing guidance. The FRB did examine the pros and cons of a Central Bank Digital Currency (CBDC) but “does not favor any policy outcome.” And, the U.S. Treasury has offered a risk assessment of money laundering risks in the crypto asset space. The FDIC joined the OCC and FRB in their “Crypto-Asset Policy Sprint” statement but has offered little else outside of requiring banks to notify the FDIC prior to engaging in crypto-related activities. The CFPB broadened its own enforcement authority in this space last year, formalized in March by Executive Order. And finally, legislation introduced in early June appears ready to assign rulemaking and enforcement authority to the Commodity Futures Trading Commission (CFTC), leaving the Securities Exchange Commission (SEC) any leftover crypto assets that are classified as securities. THE BASICS It can be difficult to understand and analyze the risks associated with crypto assets if you don’t have a grasp of some foundational terminology. Unfortunately, there’s a lot of socalled ‘gatekeeping’ in the ‘crypto community’ – e.g., folks who use overly-complicated lingo to seem more tech-savvy than others. So, here are a few layperson examples to help understand the basic terms and concepts. What is blockchain? Have you ever worked on a document at the same time as another person or team? You can see others’ initials moving about on the page followed by their edits to the collaborative document. And the revision history is saved so everyone can see who made what changes. Well, this is a great analogy for
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