The Federal Deposit Insurance Corporation is developing a more lenient framework for encryption assets.

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

Travis Hill, the acting chairman of the FDIC, recently outlined the agency's evolving stance on encryption-related activities at a banking summit. Hill stated that the FDIC is reviewing several key areas, including the interaction between regulated banks and public, permissionless blockchains.

Although other countries 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, but still emphasizes the need for appropriate safeguards to regulate these activities.

The agency is evaluating existing cross-agency guidance to establish long-term standards for the responsible use of public networks. At the same time, the FDIC is also considering whether public chains can operate in a permissioned mode and how to define and regulate blockchain configurations that blur the boundaries between open and permissioned environments.

The FDIC stated that it will issue more guidance on specific digital asset use cases. Hill pointed out that the agency will continue to assess outstanding issues related to the scope of encryption-related activities, regulatory treatment of blockchain-based products, and expectations for bank risk management. The goal of the FDIC is to establish a consistent and transparent regulatory framework that promotes innovation while ensuring compliance with safety and soundness standards.

It is worth noting that the FDIC has revoked its previous requirement for regulated institutions to notify the agency before engaging in digital asset and blockchain activities, representing a fundamental shift in the attitude of the U.S. banking system towards encryption assets and blockchain technology.

In terms of stablecoin regulation, the FDIC is reviewing potential updates to deposit insurance regulations to clarify the eligibility requirements for stablecoin reserve deposits. Key issues include liquidity risk management, safeguards against illicit finance, and cybersecurity standards.

In addition, the FDIC is also considering whether to further clarify the boundaries of permissible activities in this area or to expand regulatory guidance to cover more use cases. Regarding the tokenization of real-world assets and liabilities, including tokenized commercial bank deposits, the FDIC believes that "regardless of the technology or record-keeping method used, a deposit is a deposit."

However, the FDIC is concerned about whether counterparties can use smart contracts to withdraw funds at face value after a bank failure. To address this, the FDIC is evaluating technical solutions to prevent unexpected fund outflows in bank resolution scenarios.

These changes indicate that the FDIC is moving towards providing regulatory clarity for banks exploring digital asset infrastructure, while emphasizing the need for prudent risk controls and further clarification of permitted activities.