Cryptocurrency is currently an unregulated, speculative investment

By Hannah Flanders

With the increasing rise in popularity of cryptocurrency throughout the U.S., it is no question that banks and regulators alike aim to understand this unique form of encrypted exchange while also helping to protect the millions of individuals who have already invested in, traded, or used digital assets.

In May, crypto investors experienced the most severe price crash the global crypto market has ever seen. As inflation rises and individuals continue to draw what money they have left out of the market, prices continue to drop each day.

Cryptocurrency is a speculative investment for both banks and individuals engaging with it, and currently, there are no specific regulations tailored to it. As the market this last year has shown, although the market experiences rapid unpredictability and growing connections to money laundering activity, consumers and business alike continue to be interested in the potential benefits of this transferable wealth.

In this, many regulators are attempting to harness the security of financial institutions that are entering into the untamed landscape. As agencies — including the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) — jockey to assert regulatory authority and supervision over digital assets, it is important for banks and their counsel to consider that no regulations have been established regarding bank involvement with digital assets.

In March 2022, President Joe Biden issued an Executive Order regarding the need to establish consumer/investor protection and focus on financial stability, inclusion, and preventing against illicit activity within the American crypto market. Of this came an increase in guidance issued by several national agencies.

Guidance by the Federal Deposit Insurance Corporation (FDIC) states that all FDIC-supervised institutions that intend to engage in, or that are currently engaged in, any activities involving or related to digital assets should notify the FDIC. This action aims to provide supervisory feedback in the wake of activities that pose significant safety and soundness risks as well as financial stability concerns to banks. Additionally, the Office of the Comptroller of the Currency (OCC) advises that banks should not engage in cryptocurrency until they have notified their supervisory office and received a non-objection form.

The Financial Crimes Enforcement Network (FinCEN) has also issued several advisories to banks regarding illicit activity involving cryptocurrency. Banks should demonstrate compliance with their anti-money laundering (AML) programs and be aware of the prevalence of unregistered entities without sufficient AML controls. As with every new relationship, banks are advised to also consider the Bank Secrecy Act of 1970 (BSA) when engaging with digital assets.

In addition to guidance from federal agencies, banks should also be aware that state agencies and legislators may also begin acting on Biden’s order. In this, more proposed legislation to encourage innovation in the financial sector while also enforcing consumer protections may begin appearing at both the state and federal levels.

Currently, only one legislative act has been proposed at the federal level by U.S. Senators Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.). If enacted, the Responsible Financial Innovation Act (RFI) would establish regulatory framework for digital assets by providing industry and regulator clarity, clarifying standards, establishing jurisdictional boundaries, and protecting consumers.

At the state level, Wisconsin’s Department of Financial Institutions (DFI) and Department of Agriculture, Trade, and Consumer Protection (DATCP) have cautioned Wisconsin banks and consumers of the risks of crypto. While no legislation has yet to be proposed or passed, Wisconsin bankers should expect that — like many other states — state regulation may be forthcoming.

For questions on legal developments or regulations related to crypto or other compliance matters, please reach out to WBA legal at 608-441-1200.

*Update from originally published article: On Tuesday, August 16, guidance was issued for Federal Reserve System (FRB)-supervised banking organizations engaged in or seeking to engage in crypto-asset-related activities. The guidance includes the instruction that a banking organization need notify its lead FRB supervisory point of contact regarding such activities.

FDIC-supervised banks must now report digital asset ventures

By Scott Birrenkott

Q: Is a Financial Institution Required to Notify Its Regulator When Engaging in Activities Involving Crypto Assets?

A: Yes. FDIC-supervised institutions are required to provide notification, along with certain information, when engaged in any activities involving crypto assets (digital assets). In turn, the FDIC reviews this information to provide relevant supervisory feedback.

While this requirement applies to FDIC-supervised institutions, non-FDIC supervised institutions should still consider proactively working with their prudential federal regulator. As innovations in the space of digital assets continue to develop, and financial institutions explore new relationships, working directly with your regulator is an important step to understanding compliance expectations. Digital assets present potentially unique safety and soundness risks, as well as financial stability concerns, and consumer protection considerations. The FDIC intends to review information provided in order to work with the financial institution engaged in digital asset activities as appropriate.

Wisconsin Department of Financial Institutions (DFI) is also considering digital asset activity. While there are currently no specific Wisconsin requirements or notification requirements, Wisconsin financial institutions should still consider working proactively with the DFI when engaged in digital assets. While both state and federal regulators support innovations, this is an area that is rapidly evolving, and often misunderstood. Transparent communications between financial institutions and their regulators can help address any potential compliance or safety and soundness concerns.

The new FDIC notice requirements can be found under Section 39 of the Federal Deposit Insurance Act, 12 CFR Part 364.

By Tom Still, WTC President

The list of economic uncertainties for 2022 is long and complex, with COVID-19 variants, supply chain woes, energy disruptions, climate-change anxieties, and political frictions around the world producing jittery markets.

It’s time to look for trends in technology to calm frazzled nerves on Wall Street as well as Wisconsin’s Main Streets.

Analysts at International Data Corp., the global market intelligence firm, predict the technology industry is on track to exceed $5.3 trillion in 2022 — thus returning to the 5% to 6% annual growth rate typical before the pandemic. The United States is the world’s largest tech market, representing about a third of the projected total at $1.8 trillion.

Tech overcame the 2020 speed bump precisely because COVID-19 triggered so much change. The workplaces of today are no longer easily defined. Changes in business travel forced innovation. Cybersecurity threats led to more investment across industry lines, from financial services to “Mom and Pop” retailers. Phrases such as “quantum computing,” “virtual reality,” and “artificial intelligence” were once the exclusive lingo of computer scientists; today, they’re part of the business plans for many companies.

It all points to bigger tech budgets, greater investment and more innovation pushing through the economic super-structure.

Technology will continue to disrupt many verticals. Health care is being transformed through telemedicine and wearables, not to mention breakthroughs in diagnostics and therapeutics. The jury is out on how effective remote learning has been for students of all ages, but online education will continue to have a role in the classroom. Sales through eCommerce in the United States continue to soar (hence, some of today’s supply chain troubles) and trends such as cryptocurrency are altering the financial world.

Tech can help slow climate change effects through conservation controls in homes, offices, cities, and power plants, even if “crypto-mining” has become an energy vampire. Likewise, as technology displaces many people in the workforce, it will create more new jobs than it destroys. The trick is ensuring that people are trained to do the work and opportunities don’t bypass women and minorities.

There are some threats to U.S. tech sectors, but also opportunities for Wisconsin to grow as a tech-savvy state.

In Washington, D.C., Congress should establish data privacy rules that are national in scope versus a state-by-state approach that could hamper companies engaged in eCommerce, finance, or insurance. Congress should avoid unnecessary taxes on venture capital managers and not pass an antitrust bill that would shut down “exit” options for young companies.

Congressional consensus around bipartisan plans to invest federal dollars in key research areas could help Wisconsin, especially if the state’s research universities and private partners can compete for one or more R&D “hubs” envisioned through the National Science Foundation.

In the Wisconsin Legislature, the refining of the state’s investor tax-credit law will lead to more angel and venture capital dollars flowing into young companies. When the Qualified New Business Venture law took effect in 2005, angel and venture capital investments could be measured in the tens of millions of dollars. The 2021 total will easily exceed $500 million, in part because those credits are pulling four times their weight in private investment. Pending bills would improve the law.

The new year may be tumultuous in many ways, but growth in tech markets could help smooth choppy waters.

The Wisconsin Technology Council is the independent, non-partisan science and technology advisor to the governor and the Legislature.

By Paul Gores

In a prominent spot near the center of Brookfield Square mall, an automated kiosk quietly invites shoppers to insert cash and buy Bitcoin, Litecoin, or Ethereum cryptocurrencies.

Similar cryptocurrency kiosks — commonly called crypto ATMs or Bitcoin ATMs — can be found in other major Wisconsin malls, as well as in hundreds of convenience stores, gas stations, and retail shops around the state.

At the same time, a cryptocurrency-buying option now is available throughout Wisconsin at many kiosks operated by the self-service coin-cashing company Coinstar — 146 of them in all in the Badger State.

As cryptocurrencies and their enabling technology — blockchain — grow in acceptance and popularity, more and more kiosks that make Bitcoin, Litecoin, and other currencies available to the masses are popping up around the state and nation. There are now more than 35,000 crypto kiosks or ATMs in the U.S. offering people interested in owning the digital currency an easy way to acquire it. In Wisconsin, there are believed to be more than 500 such machines.

The buildup of crypto ATMs — and decentralized currencies operating on blockchain in general — raises questions for American financial institutions whose business traditionally has revolved around a currency with a central authority.

In the short term, bankers shouldn’t worry that cryptocurrencies are about to overtake the dollar to the point where trips to the grocery store routinely will be paid with Bitcoin, one expert said.

“We’re nowhere close to grandpa buying milk with a tiny, tiny, tiny fraction of a Bitcoin,” said computer science professor, Michael Litman, of Concordia University Wisconsin in Mequon.

Still, more companies are accepting payment in cryptocurrency, and nowadays even a wealthy donor might ask whether his or her favored charity will accept a contribution in Bitcoin. Given crypto’s momentum, bankers would be wise to learn as much as they can about cryptocurrency and consider how it could be useful to their customers, experts say.

Cryptocurrencies are here to stay, with a total market value in excess of $2 trillion and more than 200 million users across the globe, said David Krause, director of applied investment management and associate professor of finance at Marquette University in Milwaukee.

Krause said when it comes to cryptocurrency, banks should think of themselves like taxi companies before Uber, or bookstores before Amazon.

“They need to innovate and adopt digital currencies to avoid being run over,” Krause said.

The rise in crypto ATMs coincides with the interest in cryptocurrencies, particularly Bitcoin, which, while volatile, has seen its market price skyrocket over the past few years. Kiosks or ATMs offer average people access to owning Bitcoin or other digital currencies as an investment, or, if they use a vendor that accepts Bitcoin, to easily acquire Bitcoin to make a purchase.

“Coinstar and the Bitcoin kiosk industry generally serve consumers who prefer to budget or manage their funds in cash yet still need access to digital financial products like cryptocurrency,” said Michael Jack, head of product for Coinstar. “There are a variety of use cases. Consumers use cryptocurrencies to invest or save and buy and hold them in a wallet. Others use it as a form of person-to-person or person-to-business transfers. In many cases, cryptocurrency can be an easier and/or more cost-effective way to do those transactions.”

Last fall, Walmart said it had started a pilot program with Coinstar to put crypto-enabled Coinstar kiosks in 200 stores of the nation’s largest retailer. If the pilot is successful and expands to other Walmart stores, the ability to buy cryptocurrency in so many locations could go a long way toward mainstreaming the digital currency.

While some crypto ATMs allow a currency such as Bitcoin to be sold and converted to cash, most transactions at the ATMs involve a customer inserting cash and having an equal amount of Bitcoin at that day’s market price — minus fees — deposited in the buyer’s digital wallet. In the case of Bitcoin, which at the time of writing this was valued at about $48,000, even $1,000 inserted into the ATM would buy only a small fraction.

“There is growing adoption of cryptocurrency, primarily as a speculative investment,” said Scott Green, of Shazam Network-ITS Inc. “While Bitcoin can be used for person-to-person transfers or purchases from retailers that support it, the most prevalent use case is investment.”

However, even though cryptocurrency might not be well-suited for smaller financial transactions yet, it can make sense for larger deals, said Concordia’s Litman. Litman, who has owned and sold Bitcoin, is a fan of some NFTs, or non-fungible tokens, which also are powered by the blockchain.

NFTs are used as a way to validate ownership of something unique, the way, say, a title registered with the Department of Motor Vehicles shows who bought a car. An NFT can do the same thing, except it’s verified by the blockchain for proof of ownership.

“I would actually make the argument that in some ways banks should be embracing this,” Litman said.

Litman also said using NFTs can cut the red tape and expense of international transactions. For instance, $100,000 in U.S. dollars could be converted to an NFT such as Ripple, sent via blockchain to a Ripple digital wallet in China, and then converted into the yuan.

Using a crypto ATM comes at a cost to the user. A commission typically is charged, along with a flat fee. Fees range widely depending on which company operates the ATM.

For example, each cryptocurrency purchase at a Coinstar kiosk carries a transaction fee of 4% and a cash exchange fee of 7%.

Bitcoin Depot, which runs the crypto ATMs at Brookfield Square and other Wisconsin malls, allows for daily purchases of from $20 to $15,000 of cryptocurrency.

Retailers who provide space for cryptocurrency ATMs do so for the reason they host other types of automated kiosks or services — mostly for the rent.

“Adding this service provides an additional revenue stream to the retailer,” said Coinstar’s Jack. “It also brings more consumers into their establishment who are then more likely to spend money in the store.”

Jack said rents vary between providers and retailers, and can encompass either a flat rent and/or a revenue share.

“For Coinstar retailers, it is a service offered on an existing kiosk with no additional space or labor required by the retailer,” he noted.

On its website, Coin ATM Radar puts the number of cryptocurrency kiosks in Wisconsin at 416, although that appears not to include the nearly 150 Coinstar kiosks offering a crypto function.

Among other crypto ATM operators in Wisconsin are Digitalmint, Athena, and CoinFlip.

As of now, crypto ATMs are not regulated by the Wisconsin Department of Financial Institutions. But as locations and usage grows, they could face increasing scrutiny by state and federal regulators.

CNBC reported in November that as the number of crypto ATMs in the U.S. has grown, criminals increasingly have used the machines in schemes including money laundering and drug trafficking.

The CNC report said the ease of transactions and relative anonymity allowed when using them has contributed to abuses of the ATMs, and that some in the industry are pushing for uniform standards to prevent crime amid a patchwork of rules and state laws.

Experts generally believe some kind of regulation is coming for cryptocurrencies.

“I do expect more regulation over time. But regulation focused on cutting off fraud should and hopefully will be first and foremost,” said Joseph Wall, associate professor of accounting at Marquette University.

Litman said some attempt to regulate cryptocurrency is likely, but it might not be easy.

“Yes, the government is going to want to step in and do it. With blockchain, because of the nature of it, it’s going to be very difficult. Who are they going to hold accountable?” he said.

Shazam’s Green said that to some extent, there are regulations and statutes that apply to cryptocurrency, but the enforcement is difficult due to the nature of decentralized finance.

“For example, Bitcoin as a crypto should roughly follow commodities laws, and tokens that look like securities should fall under securities laws,” Green said. “The regulatory environment around the entire crypto, DeFi (decentralized finance), and stable coin industry is in flux, but we are starting to get more clarity by the day. Also, as banks start delving into it more, they will be seeking guidance and approval of regulators for their projects, and that will help clarify ambiguities.”

Should banks become involved in offering customers crypto options or even crypto ATMs?

“It would make a lot of sense to offer a platform like an ATM, but one that can do more,” said Marquette’s Wall, an expert in blockchain and related technologies. “A bank that wants to increase its customer base and service its customers based on their needs should consider multiple ways that their customers may want to store their wealth, conduct transactions, and interact with their mediums of exchange. ATMs are one way to do this. Increasing the ability of a customer to transact, transfer, and use their chosen medium of exchange is the very basis of banking, starting with the barter system. I cannot imagine a bank believing that U.S. dollars only is a permanently sustainable business model.”

Green said there’s not a need for banks to rush into crypto ATMs.

“Banks don’t need to do anything to allow customers to purchase and use cryptocurrency. The debit cards, ACH, and new faster payment gateways will all help facilitate fiat-to-crypto conversions for customers when they’re using any third-party service such as an exchange,” Green said. “A question banks may start asking is what else can we do directly ourselves that provides value and earns revenue? For example, rather than ATMs, the digital banking platforms that banks have provide a much more flexible, efficient, and convenient interface to buy and sell crypto.”
Marquette’s Krause doesn’t particularly like the idea of banks adding crypto ATMs.

“Bitcoin and crypto ATMs can be convenient for investors and consumers, but I am not a fan,” Krause said. “They tend to have high transaction fees, they are not widely available, and like most ATMs, they often have technical problems. I think bankers have a lot more to worry about than crypto ATMs!”

Regardless of how much crypto ATMs proliferate, banks should be paying attention to cryptocurrencies, experts said.

Wall said decentralized financial models are one of the greatest threats to traditional banking in a long time.

“I have seen studies that suggest it can cost more for a poor person to send money to and from other relatives in other economically impoverished areas than it did 30 years ago,” Wall said. “This should not be. Cryptocurrencies can be an equalizer by slashing rates and making costs proportional for all. The speed, execution, immutability, and cost structure are such that it is understandable why the market capitalization of DeFi companies is already rivaling that of traditional banks.”

There are ways for banks to work with cryptocurrencies, and they need to look into them, Wall said.

“Some banks will likely create their own cryptocurrencies, embrace the use of a Fedcoin should one be created, or partner with traditional cryptocurrencies to hedge their risks in the space,” Wall said. “Those banks which do so will likely experience a reduction of profitability in percentage terms, but an increase in the number of transactions such that overall profitability may increase, depending on their creativity.”

Wall said banks that ignore the sector are likely establishing a profitability maximum this year.

“They will likely still be able to grow for a while, but the gap between their rate of growth and the potential growth they could have — by embracing cryptocurrencies — will begin to widen at an increasing rate,” Wall said. “It is not that banks are going away. The business models they employ are rapidly changing. Those that adapt can still do well. Those that do not will struggle.”

Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years.

SHAZAM® is a WBA Gold Associate Member.


This primer on cryptocurrency will identify issues that your institution should be ready to address as accountholders’ activities expand. This fact-filled webinar will unpack guidance, risks, and red flags.

After This Webinar You’ll Be Able To:

  • Understand how payment for goods and services has evolved
  • Define common crypto-related terms
  • Identify key players and roles within the cryptocurrency industry
  • Explain how virtual currency is acquired
  • Recognize common cryptocurrency scams
  • Use agency-issued guidance to develop policies and procedures
  • Manage risks when paying with cryptocurrency
  • Discuss recent cryptocurrency fraud cases
  • Detect virtual currency red flags defined by FinCEN and FATF

Webinar Details
Cryptocurrency activities are becoming a widely accepted payment method and investment tool. Does your institution understand basic industry terms, definitions, roles, and risks? Can your employees identify possible cryptocurrency red flags? Have your policies and procedures been updated to reflect this medium of exchange and agency-issued guidance? This webinar will explain common cryptocurrency industry terminology, expound on various roles within the industry, identify potential red flags and risks, and address ways accountholders can acquire and sell cryptocurrency.

As this type of currency continues to evolve, the financial industry is starting to enter this payment world by offering cryptocurrency safekeeping and custodial services. While your institution may not be ready to enter the market at this level, are you prepared to underwrite a loan in which your applicant is receiving cryptocurrency payments or have assets that are predominately held in cryptocurrency? Join us to learn the current regulatory guidance and expectations, as well as lessons learned from recently identified fraud cases.

Who Should Attend?
This informative session is designed for compliance officers, BSA officers, trainers, and all staff that desire to expand their cryptocurrency knowledge.

Take-Away Toolkit

  • Crypto lingo definitions
  • Virtual assets red flag indicators of money laundering and terrorist financing
  • Cryptocurrency resources
  • Employee training log
  • Interactive quiz
  • PDF of slides and speaker’s contact info for follow-up questions
  • Attendance certificate provided to self-report CE credits

NOTE: All materials are subject to copyright. Transmission, retransmission, or republishing of any webinar to other institutions or those not employed by your agency is prohibited. Print materials may be copied for eligible participants only.

Presenter Bio

Molly Stull – Brode Consulting Services, Inc.
Molly Stull began her career as a teller while working on her undergraduate degree and has continued working in the financial industry ever since. She has experienced the growth of a hometown bank, branch mergers, charter changes, name changes, etc. Stull has activated business resumption plans, performed secondary market quality control reviews, processed wires, filed SARs, and coordinated reviews with external auditors and examiners. Her favorite role has always been educating staff and strongly believes that if staff understands the reason for a process they will be more compelled to follow the procedures. Molly holds a bachelor’s from the University of Akron and an MBA from Ashland University.

Registration Options

  • $245 – Live Webinar Access
  • $245 – OnDemand Access + Digital Download
  • $350 – Both Live & On-Demand Access + Digital Download

WBA’s Trust Conference is an all-encompassing event that concentrates on updating its attendees on new and upcoming changes in regulations, the economy, and overall trust department functions. Join us for this year’s WBA Trust Conference being held at the WBA Office on May 25th. The conference will kick off at 9:00 a.m. and adjourn at approximately 3:00 p.m.

The WBA Trust Conference is approved for 5.25 CTFA credit through ABA.

Who Should Attend?

The conference is designed for all those that are involved in trust and estate planning, including trust officers, wealth managers and trust administrators.

Topics Include:

  • WBA Update and Government Relations Update – Wisconsin Bankers Association, John Cronin
  • Trust Code Update & Trust Administration Panel
  • Preparing for the New RMD Regulations – Ascensus – Ben Maas
  • Cryptocurrency – Compliance Alliance – Julia Gutierrez
  • Recognizing and Responding to Elder Abuse and Undue Influence – Godfrey & Kahn, S.C. – Jonathan Ingrisano & Nicholas Bezier

Registration Information:

Trust Section Members:

  • $220 – Per Attendee

WBA Bank Members – Non Trust Section Members:

  • $245 – Per Attendee

WBA Associate Members

  • $245 – Per Attendee

Attendee Registration: The registration fee of $245/attendee includes conference materials, lunch and refreshment breaks. Members of the WBA Trust Banking Section* receive a discounted registration fee of $220/attendee.


*Membership in the WBA Trust Banking Section is by bank – all employees of section member banks can register at the discounted rate. Please contact WBA’s Scott Birrenkott via email with any questions regarding section membership.

Refund Policy: A refund, less a $25 administrative fee, is provided for cancellations requested on or before Thursday, May 13, 2021.

Virtual currency continues to emerge as a hot button for BSA/OFAC risk. In this session, you will learn how virtual currency operates and its place in the fiat currency world. We will provide details on the U.S. banking system’s role in processing these transactions and upcoming regulatory changes that will allow financial institutions to serve as currency exchangers. We will also review how to differentiate investors from exchangers and provide guidance on how to identify these  transactions. We will discuss FinCEN and the U.S. Treasury advisories regarding the risk virtual currency transactions could present and explore monitoring protocols and SAR filing responsibilities relating to virtual currency transactions.

Target Audience
Anyone involved in virtual currency transactions

Robin Guthridge, Wipfli LLP

Registration Option
Live presentation $275

Recording available through April 25, 2022