Unsafe or Unsound Banking Practices: FDIC Issues Consent Order to Cryptocurrency-Friendly Cross River Bank

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

In recent years, cryptocurrency has gained widespread acceptance as a legitimate investment vehicle and mode of payment all over the world. However, certain banks and financial institutions are still hesitant about getting involved in the industry. One such bank that has embraced cryptocurrency is New Jersey regional bank Cross River Bank. Unfortunately, the bank has been recently hit with a Consent Order from the Federal Deposit Insurance Corporation (FDIC) over alleged unsafe or unsound banking practices. In this article, we explore what the Consent Order entails, what it means for Cross River Bank, and what the future of cryptocurrency-friendly banking might look like.

The FDIC Consent Order: A Brief Overview

A Consent Order is a relatively informal procedure commonly used by federal agencies in the United States to handle cases. In the case of Cross River Bank, the FDIC issued a 34-page Consent Order alleging that the bank had engaged in unsafe or unsound banking practices. The document states that the bank failed to establish and maintain internal controls, information systems, and prudent credit underwriting practices. According to the FDIC, Cross River Bank’s failure to implement these practices put the bank at risk and hurt its financial stability.

What Does This Mean for Cross River Bank?

As a result of the Consent Order, the Cross River Board of Directors has been called upon to strengthen supervision and guidance of management. The bank is also required to take measures to correct any unsafe practices and prevent future violations. Specifically, the bank is required to conduct a comprehensive review of its information system, identify new credit products, and submit a list of third parties providing these products. Additionally, Cross River Bank will be required to submit a written plan on how it intends to meet the requirements outlined in the Consent Order.

The Future of Cryptocurrency-Friendly Banking

The recent Consent Order issued to Cross River Bank highlights the potential challenges faced by banks and financial institutions venturing into the cryptocurrency space. Due to the unregulated nature of cryptocurrency, traditional banking regulations are not always equipped to handle the unique risks posed by the industry. However, as the popularity of cryptocurrency continues to increase, it is inevitable that more banks will become involved. The case of Cross River Bank serves as a valuable lesson for banks and financial institutions that are considering venturing into the cryptocurrency space. Banks must ensure that they remain compliant with existing regulations while properly addressing the risks posed by cryptocurrency through safe and sound banking practices.

Conclusion

The Consent Order issued to Cross River Bank by the FDIC serves as a reminder that the cryptocurrency industry is still relatively uncharted territory for traditional banking regulations. Banks and financial institutions that want to venture into this area must be aware of the unique risks and implement safe and sound practices to ensure financial stability. Despite the challenges posed by cryptocurrency, innovative banks like Cross River Bank continue to embrace the industry and seek to provide customers with new and exciting financial products.

FAQs

1. What is a Consent Order?
A Consent Order is a relatively informal procedure commonly used by federal agencies in the United States to handle cases.
2. What did the FDIC allege against Cross River Bank?
The FDIC alleged that Cross River Bank had engaged in unsafe or unsound banking practices.
3. What is the future of cryptocurrency-friendly banking?
As the popularity of cryptocurrency continues to increase, it is inevitable that more banks will become involved. Banks must ensure that they remain compliant with existing regulations while properly addressing the risks posed by cryptocurrency through safe and sound banking practices.