Digital assets are rapidly growing into more commonplace on the U.S. banks’ balance sheets as of late. This could lead to the eventuality of one of these institutions possibly failing, and should that happen, the FDIC, or the Federal Deposit Insurance Corp. will have to step right in to clean up the mess.
Enter digital assets custodian, Anchorage. It’s the 1st startup to receive a trust charter from the Office of the Comptroller of Currency. Per the documents that are obtained by filing for a Freedom of Information Act (FOIA) request, the bank finds itself in the final stages of bidding for a contract with the FDIC so it can act as a crypto asset management and solution provider.
CoinDesk filed for a FOIA request with the intention of seeking out all crypto custodian-related records from the federal agency. Anchorage is the only company that’s mentioned within the documents, which leads to the implication that to provide storage and disposal services to the FDIC, no company besides Anchorage seems to be in the running.
Despite the documents listing September 8, 2021 for an award date, a government website tracking agency spending seems to indicate that no contracts were awarded in 2021, with that so far also being the case for 2022.
The FDIC is a federal banking regulator situated in the U.S. with the objective of providing deposit insurance for national banks. Should one of these banks end up failing, their customer deposits are protected by up to a sum total of $250,000 in insurance per account.
Regarding the potential contract or how it aims to provide the service, Anchorage has declined to comment, at least for now. Per a report from Decrypt in September, it was stated that the commission was very close to making a deal with the company for all of their services.
The document is in fact signed by the CEO of Anchorage, Nathan McCauley, as well as the FDIC contracting officer Kervin Dupart.
REQUIREMENTS FOR REGULATION
The deal is said to be worth $1.5 million over 3 years, with the option being available for an additional 2 years’ extension, per the FOIA response. Anchorage would, as part of this deal, act as a contractor for the FDIC-R, the FDIC’s receivership arm, for them to minimize losses for the deposit insurance fund by swiftly realizing and liquidating the value of assets in receivership.
Additionally, Anchorage would also be required to build a “crypto asset information list,” for the FDIC. This would outline what assets are being held by an institution, their value, and any 3rd party usage of the asset, for example being used as collateral for a loan by way of a smart contract.
Digital assets aren’t covered by the FDIC. People familiar with the way the agency thinks reached out to CoinDesk in October, telling them they’d begun studying deposit insurance for Stablecoins–specifically, pass-through insurance for issuers of stablecoin, which would enable them to hold their dollar reserves in banks.
Anchorage would also, per the document, be required to hold digital assets in cold storage, containing private keys completely firewalled from either local or external networks.
On top of all that, Anchorage will be tasked with reporting inventory, cash collections, inventory changes, and in-progress settlements as well as “crypto assets held for others” and other information to the FDIC on a monthly basis. They shall also be required to file additional reports that are requested on an ad hoc basis.
Anchorage could also be tasked with converting its digital asses to the U.S. dollars or return them to 3rd parties as needed.
THE OFFERING OF DEPOSITS
Fintech firm Milo very recently made an announcement citing its plans to offer mortgages collateralized with Bitcoin in the near future. Milo does not have FDIC insurance at this point, but it isn’t necessarily required to as it’s a non-bank entity. If Milo’s effort is indeed successful, it’s very likely that other banks and institutions would definitely notice, and follow up with their own offering.
Ledn, a Crypto lender has also signaled the work it’s doing on a similar product. United Wholesale Mortgage, which serves as the 2nd largest mortgage lender in the U.S. had already moved in on offering mortgages with crypto in mid-2021, though they, unfortunately, canceled their initiative in October, citing low demand as the reason behind their decision.
Banks in the U.S. have been slowly rolling out crypto services to their wealthiest clients once they got the green light from the OCC back in October of 2020. Most crypto owned by retail investors is held on exchanges. An aspirin federal bank by the name of Crypto lender Figure also made some recent modifications to its application for a national charter to note that it’d be offering FDIC-insured accounts.
It remains to be seen if these exchanges are well and truly interested in the FDIC insurance, although many have in fact obtained their custodian licenses, which come with their own form of insurance included.
As for Anchorage, it and other digital assets banks do not have FDIC insurance on their own deposits.