The Inspector General's Office (OIG) of the Federal Deposit Insurance Corporation (FDIC) has published an evaluation report on the FDIC's crypto asset risk strategy. The report, in a redacted version, has been made public.

FDIC's Efforts to Understand Institutions' Crypto Activities

In early 2022, the FDIC adopted a "bottom-up" approach to crypto risk, according to the OIG. This comprehensive strategy involves understanding the crypto-related activities of supervised institutions, offering case-by-case supervisory feedback, and providing broader industry guidance on an interagency basis, explains Cointelegraph.

The FDIC issued a letter requesting information to gain insights into institutions' crypto activities. As of January 2023, 96 institutions expressed interest in or provided details about their current crypto asset activities. The exact number of institutions that received feedback from the FDIC was undisclosed. However, some institutions were advised to pause their crypto-related activities temporarily until the FDIC completed its assessment.

Incomplete Strategies for Crypto Asset-Related Risks

The OIG's evaluation highlighted that while the FDIC had initiated efforts to address risks associated with crypto assets, its strategies were incomplete, reports Investing. Specifically, the FDIC had not conducted a comprehensive risk assessment to determine these risks' significance and potential impact. The OIG emphasized the need for the FDIC to complete a risk assessment and provide guidance to supervised institutions accordingly.

Based on its evaluation, the OIG recommended that the FDIC document risk assessments, evaluate the significance of identified risks, and develop mitigation strategies through comprehensive guidance. Additionally, the OIG found that the process for providing feedback in response to the FDIC's letter lacked clarity. The OIG made two recommendations to address these gaps.

Despite the OIG's findings, the recommendations were classified as not significant. The FDIC concurred with the recommendations and expects to complete corrective actions by the end of January 2024.

Inspector generals were introduced at U.S. federal agencies in 1978 to provide independent audits, evaluations, and investigations. The OIG's report serves as a vital tool in highlighting areas for improvement within the FDIC's crypto asset risk management approach.

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