US Federal Reserve Takes Strict Measures Against Customers Bank for Mismanaging Crypto Risks
The US Federal Reserve has recently taken strict measures against Customers Bank, a Pennsylvania-based institution, for mishandling the risks associated with its clients in the crypto sector. Customers Bank, which collaborates with crypto enterprises like Coinbase, Circle, and Galaxy Digital, will now have to adopt a new compliance approach and inform the Fed before introducing any new digital asset-related initiatives.
In response, Customers Bank has committed to addressing the compliance gaps identified by regulators.
Compliance and Risk Management Issues
Fed officials have identified “significant deficiencies” in Customers Bank’s risk management practices, particularly concerning anti-money laundering laws and regulations. The enforcement agreement signed by the bank’s executives highlights loopholes in monitoring illicit activities among clients using digital assets.
Relations with Crypto Companies
Historically, Customers Bank has collaborated with top companies in the crypto field, such as Coinbase, Galaxy Digital, and Circle. However, following last year’s tech bank crisis, it has become rare to find US banking institutions supportive of cryptocurrencies. In June, it was reported that the bank reduced its activities with hedge funds and imposed deposit caps on cryptocurrency.
CBIT Payment Platform
While Customers Bank only handles transactions in US dollars and does not accept or lend cryptocurrencies, it offers a real-time blockchain-based payment platform called Customer Bank Instant Token (CBIT). This platform allows clients to make USD payments 24/7, which has been a focal point of the Fed’s action.
Bank’s Reactions and Corrective Measures
Following the Fed’s order, Customers Bank must develop a series of written plans and adopt a new compliance approach. This includes an agreement to “ensure that the bank collects, analyzes, and maintains complete and accurate information for all customers.” Additionally, the bank must inform the Fed 30 days in advance before introducing any “new strategic initiative, product, service, or relationship with third parties related to the digital asset strategy.”
Federal Reserve’s Reform Initiatives
US banking regulatory authorities, including the Fed, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp, have already issued guidelines aimed at limiting banks’ exposure to the crypto sector.
Last year, the Fed announced a revamp of its approach to digital assets, implementing a program to supervise innovative activities with specialized experts to help monitor the interaction between the crypto sector and the traditional banking system.
