The Inspector General’s Office (OIG) of the Federal Deposit Insurance Corporation (FDIC), the independent United States government body that provides deposit insurance to commercial and savings banks, has published an evaluation report on the corporation’s crypto asset risk strategy. A redacted version of the report has been released to the public.

The FDIC adopted a “bottom up” approach to crypto risk in early 2022, the OIG said. That approach consists of understanding supervised institutions’ crypto-related activities, providing case-by-case supervisory feedback and “providing broader industry guidance on an interagency basis.”

To understand institutions’ crypto activities, the FDIC issued a letter asking them about it. As of January 2023, 96 institutions had signaled their interest in or provided current activities with crypto assets. The number of institutions that received feedback from the FDIC was blacked out. Some had been advised to pause crypto-related activity until the FDIC had made its assessment, but that number was also covered up.

The OIG found that the FDIC started to develop strategies concerning risks associated with crypto assets, but it was incomplete:

“However, the Agency has not assessed the significance and potential impact of the risks. Specifically, the FDIC has not yet completed a risk assessment to determine whether the Agency can sufficiently address crypto-asset-related risks through actions such as issuing guidance to supervised institutions.”

According to the OIG, the FDIC should document its risk assessments, assess their significance and develop mitigation strategies such as guidance. Moreover, the process for providing feedback in response to its letter was unclear. There is no timeframe for reviews or clear end to the process, the OIG said. The OIG made two recommendations to resolve those situations.

FDIC Strategies Related to Crypto-Asset Risks: FDIC has started to develop & implement strategies to address crypto-asset risks; hasn’t assessed significance & potential impact of risks, and feedback process to supervised banks is unclear. 2 recs. https://t.co/GRce5uG1By pic.twitter.com/7rmRGYJwk3

— FDIC OIG (@FDIC_OIG) October 18, 2023

The OIG classified its recommendations as not significant. It noted that the FDIC had already concurred with the recommendations and planned to complete corrective actions by the end of January 2024.

Inspector generals were introduced at U.S. federal agencies in 1978. They provide independent audits, evaluations and investigations.

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