FDIC Issues Consent Order to Cross River Bank for Cryptocurrency Business Practices

According to reports, the Federal Deposit Insurance Corporation (FDIC) of the United States has issued a Consent Order to Cross River Bank, which is cryptocurrency friendly, regarding “unsafe or unsound banking practices”. Cross River Bank is a New Jersey regional bank supported by venture capital, conducting business with major cryptocurrency companies such as Coinbase and Circle. Consent orders are an informal procedure commonly used by federal agencies in the United States to handle cases. This 34 page consent order states: “The FDIC has considered this matter and determined that the bank neither acknowledges nor denies the failure to establish and maintain internal controls, information systems, and prudent credit underwriting practices.” The document calls on the Cross River board of directors to strengthen supervision and guidance of management, and take measures to correct any unsafe practices and prevent future violations. The bank is also required to review its information system, identify new credit products, and submit a list of third parties providing these products, as well as other tasks.

Cross River Bank, a crypto friendly bank, faces US FDIC scrutiny

Introduction

A Consent Order has been issued to Cross River Bank (CRB) by the Federal Deposit Insurance Corporation (FDIC), regarding “unsafe or unsound banking practices” in relation to their cryptocurrency business practices. CRB is a New Jersey regional bank backed by venture capital and has established relationships with major cryptocurrency companies like Coinbase and Circle. While a consent order is an informal procedure, this 34 page document outlines the necessary steps to mitigate any unsafe practices and prevent future violations.

Background

As the use and popularity of cryptocurrency continues to grow, there has been increasing scrutiny from regulatory bodies like the FDIC to ensure proper compliance and risk management practices are in place. Cross River Bank has been conducting business within the cryptocurrency industry and the FDIC has deemed it necessary to enforce a Consent Order to ensure that the bank is operating in a safe and sound manner.

Unsafe Practices Outlined in the Order

The Consent Order mandates that CRB must establish and maintain internal controls, information systems, and prudent credit underwriting practices to prevent future violations. Additionally, the board of directors is required to strengthen supervision and guidance of management, conduct a review of information systems, identify new credit products, and submit a list of third parties providing these products.

Implications for Cryptocurrency Industry

The Consent Order highlights the importance of regulatory compliance within the cryptocurrency industry. While cryptocurrency provides many benefits, such as decentralization and faster transactions, the industry still experiences volatility and risk. Banks that do business with cryptocurrency companies must also ensure they are following proper compliance and risk management practices to reduce their own risk.

Conclusion

The FDIC’s Consent Order to Cross River Bank for “unsafe or unsound banking practices” in relation to their cryptocurrency business practices marks another step towards greater regulatory oversight for the cryptocurrency industry. The order serves as a reminder to all financial institutions that conduct business with cryptocurrency companies to maintain proper compliance and risk management practices.

FAQs

Q: What is a Consent Order?

A: A Consent Order is an informal procedure commonly used by federal agencies in the United States to handle cases and outline necessary steps to mitigate unsafe practices and prevent future violations.

Q: What cryptocurrencies does Cross River Bank conduct business with?

A: Cross River Bank has established relationships with major cryptocurrency companies such as Coinbase and Circle.

Q: What does the Consent Order require Cross River Bank to do?

A: The Consent Order mandates that CRB establish and maintain internal controls, information systems, and prudent credit underwriting practices, strengthen supervision and guidance of management, conduct a review of information systems, identify new credit products, and submit a list of third parties providing these products.