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The Inspector General’s Office (IG) of the FDIC recently published an evaluation report on the FDIC’s crypto risk assessment process to be insufficient.
The Inspector General’s Office (IG) released an evaluation report on the Federal Deposit Insurance Corporation’s (FDIC) crypto risk strategy and found it inadequate. The FDIC is an independent US government body that provides deposit insurance to commercial and savings banks.
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
IG Finds FDIC’s Report Inadequate
The IG is responsible for overseeing the FDIC’s performance and, in its report, highlighted concerns with the Corporation’s readiness to address the significance and potential impact of risks associated with crypto assets. According to the IG, the FDIC’s lack of clear guidance has created uncertainty for banks about appropriately taking action regarding crypto risk.
In a redacted version of the report, the IG notes while the FDIC has started to develop strategies to address the possible risks, the process is lacking:
“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.”
IG Makes Recommendation to Resolve FDIC’s Issues
In its report, the IG made recommendations addressing the issues with the FDIC’s procedures.
The Inspector General indicated the FDIC should document its risk assessments and, evaluate their significance, and, on that basis, develop mitigation strategies.
It further took issue with the Corporation’s process for providing feedback to a letter it issued enquiring into institution’s crypto activities. The IG specifically mentioned that there is no timeline for reviews.
The IG, however, said the FDIC had already complied with its recommendations and said the Corporation planned to rectify its issues by the end of January 2024.
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