Our Take: financial services regulatory update – April 04, 2025

Change remains a constant in financial services regulation. Read "our take" on the latest developments and what they mean.

Current topics – April 04, 2025

1. Digital assets: FDIC and CFTC rescind past guidance; HFSC advances STABLE Act
2. OCC withdraws from climate risk principles and SEC stops defending disclosures
3. House subcommittee discusses Currency Transaction Report threshold
4. On our radar

1. Digital assets: FDIC and CFTC rescind past guidance; HFSC advances STABLE Act

What happened? Over the past week, the FDIC and CFTC rescinded previous digital assets guidance while the House Financial Services Committee voted to advance a bill that would provide a legal and regulatory framework around dollar-backed stablecoins (the STABLE Act).
What did the FDIC rescind? On March 28^th, the FDIC issued a letter rescinding a 2022 letter that established a requirement for firms that wish to engage in crypto-related activities to notify the agency before doing so. The rescission is accompanied by clarification that FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior approval. It also reminds institutions that they should (1) consider risks including market risk, liquidity risk, operational risk, and cybersecurity risk and (2) follow consumer protection and AML requirements.
What did the CFTC rescind? Also on March 28^th, the CFTC withdrew two staff advisories, one on virtual currency derivative product listings and another on risks related to clearing digital assets. The CFTC states that the withdrawals reflect additional experience with virtual currency derivatives and to clarify that its regulatory treatment of these products may not vary from its treatment of others.
What is in the STABLE Act? The bill contains one-to-one reserve requirements in cash or high-quality liquid assets, disclosure requirements, and custody and segregation requirements. It also states that bank stablecoin issuers would be supervised by their primary federal regulator while the OCC would supervise nonbank stablecoin issuers.
What’s next? The STABLE Act will need to be reconciled with similar legislation in the Senate (the GENIUS Act).

The door continues to open for crypto activities – and for related risks. The FDIC’s letter follows a similar recent step from the OCC and will continue to encourage banks to begin developing and executing crypto strategies and enable those that have been preparing strategies to more quickly unleash them. Examples of services include providing custody services, lending against crypto assets, and providing traditional banking services to crypto businesses (see our previous Our Take for more information). Banks providing new services should remain aware of the attendant risks of these innovations and address them in a way that protects consumers, promotes safety and soundness and protects financial stability. To do so, they should consider the impact of stablecoin redemption risk to their liquidity programs; how volatility in crypto markets could impact custodial reporting and, where applicable, deposit flows. Banks should review and enhance frameworks for and operations around valuation and collateral management to handle more volatile crypto assets as well as cyber and KYC/AML programs to address unique digital asset risks.

Clarity for stablecoin issuers is in sight. While details need to be worked out to reconcile the STABLE Act with the Senate’s GENIUS Act, particularly regarding the permissibility of nonbank entities to issue stablecoins, we expect the bill will eventually pass both chambers of Congress and be signed into law. Banks will then need to develop approaches to how stablecoins will fit into their strategy. In cases where banks determine to move beyond custody services, such as stablecoin issuance, they should consider how they will manage funding and asset liquidity risk; how they will manage operational risk considerations including technology implementation and cyber risk; and how they will need to enhance their compliance programs to meet regulatory expectations around AML and KYC.

2. OCC withdraws from climate risk principles and SEC stops defending disclosures

What happened? On March 31^st, the OCC withdrew from the interagency principles for climate-related financial risk management for large financial institutions that it finalized along with the Fed and FDIC in October 2023. Separately, on March 27^th, the SEC voted to end its defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions, which have been challenged in several jurisdictions.
What does the OCC expect now? The principles did not add any new requirements for banks but outlined a framework for effective climate-related financial risk governance, policies and procedures, strategic planning, risk management, scenario analysis, data, risk measurement and reporting. Acting Comptroller Rodney Hood said climate-related risks should already be covered by the OCC’s broader risk management guidance, which includes consideration of potential exposures to severe weather events or natural disasters.
What’s next for the SEC climate risk disclosures? The SEC’s notification to the Eighth Circuit Court of Appeals said that its counsel was “no longer authorized to advance” arguments the agency had made to defend the rule under the previous administration. In a February 11^th statement, Acting SEC Chairman Mark Uyeda noted that he and Commissioner Hester Peirce voted against the rule and agreed with industry challenges to the SEC’s authority and adherence to the Administrative Procedure Act in adopting the rule. The rule remains stayed while the legal case continues as 18 states and the District of Columbia may defend the rule as intervenors.

Our Take

Effective financial risk management remains in focus. While the Administration will likely continue to de-prioritize specific climate risk initiatives, banks must still recognize and manage the impact of physical and transitional climate risks on their strategies and clients. They should also expect examiners to continue evaluating how climate considerations are integrated into their credit, operational and market risk management programs, particularly for firms with significant exposure to areas and industries increasingly prone to natural disasters.

Communication of climate exposures is still an imperative. It is only a matter of time before the SEC’s climate risk disclosures are formally overturned by either a court ruling or new rulemaking. However, this will not eliminate the need for companies to understand and communicate their climate risk exposures and related risk management to key stakeholders, including boards, investors, counterparties and supervisors. In addition, many companies will remain subject to the European Union’s Corporate Sustainability Reporting Directive (CSRD) and California’s Climate Corporate Data Accountability Act (SB253), which requires large companies doing business in California to publicly disclose their greenhouse gas emissions, including Scope 1, 2, and 3 emissions, starting in 2026. Accordingly, companies need to continue to develop capabilities around climate data collection, scenario analysis, credit portfolio monitoring, analysis and reporting.

3. House subcommittee discusses Currency Transaction Report threshold

What happened? On April 1^st, the House Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing on tools and techniques to combat financial fraud and discussed the Financial Reporting Threshold Modernization Act, which would raise the threshold for mandatory Currency Transaction Report (CTR) filing from $10,000 to $30,000 and implement inflation adjustments every five years.
What did the subcommittee discuss? The $10,000 currency transaction threshold for mandatory CTR filing has not increased since the Bank Secrecy Act became law in 1970. Subcommittee members and witnesses focused their remarks on the burden ever-increasing CTR filing volume places on financial institutions, and how filing has become a “check the box” exercise more than a useful tool to support law enforcement efforts to combat fraud and money laundering. Subcommittee Chair Warren Davidson (R-OH) noted that while FinCEN estimates that financial institutions filed 57,000 CTRs per day in 2023, the Government Accountability Office found that only 5.4% of CTRs were accessed by law enforcement from 2013-2023.
What’s next? The House Financial Services Committee would have to act on the Financial Reporting Threshold Modernization Act for the bill to move forward.

Our Take

CTR threshold relief may be gaining momentum. While there appears to be wide agreement amongst the industry, the Administration, and Capitol Hill that the general CTR filing threshold should be increased, progress on this issue remains elusive. Though law enforcement accesses a small portion CTRs, FinCEN’s prior efforts to raise the threshold have encountered resistance from law enforcement and national security agencies for fear of reducing visibility into illicit transaction activity. That said, further direction from the Administration could accelerate House or FinCEN action to adjust requirements. Even if Congress or FinCEN raise the general CTR filing threshold, there could continue to be targeted thresholds, for example, 30 zip codes on the southern border subject to a lower general filing threshold to target money laundering activity. The subcommittee hearing on CTRs is a step forward, but hurdles remain before the requirements are changed through law or regulation. As a result, though CTR threshold reform is overdue, financial institutions should continue to engage with legislators and continue to automate CTR processes as much as possible. In the event the general filing threshold increases, banks should be prepared to update their transaction monitoring coverage assessments and reassess staffing needs.

4. On our radar

These notable developments hit our radar recently:

Barr speaks on AI. On April 4^th, Fed Vice Chair Michael Barr outlined how generative AI is rapidly becoming a competitive necessity in banking while warning that its risks must be actively managed. He emphasized the need for explainable, replicable, and secure AI systems, especially when used in areas like credit underwriting and customer service. Barr called on banks to apply strong governance and oversight to AI tools and third-party relationships, with a focus on risks like data leakage and bias.

Senate banking advances nominations. On April 3^rd, the Senate Banking Committee voted to advance the nominations of Paul Atkins to be SEC Chair, Jonathan Gould to be Comptroller of the Currency, and Luke Pettit to be Assistant Secretary of the Treasury.

Section 1071 rulemaking: Repeal bill passes House committee as CFPB says it will revisit the rule. On April 2^nd, the House Financial Services Committee advanced a bill to repeal Section 1071 of the Dodd-Frank Act, which requires the CFPB to issue a rule prescribing small business lending data collection and reporting. Separately, on April 3^rd, the CFPB said in a court filing concerning a legal challenge of its March 2023 1071 rule that it plans to issue a new 1071 rulemaking.

Trump issues Executive Orders (EOs) to phase out paper checks and prevent fraud in Treasury payments. On March 25^th, President Trump issued an EO for the Treasury Department to stop issuing paper checks for intragovernmental payments, benefits payments, vendor payments, and tax refunds by September 30^th, 2025. Instead, payments will be made through electronic funds transfers (EFTs) including direct deposit and prepaid cards. The EO makes exceptions for individuals without access to banking services or electronic payment systems; emergency payments where electronic transfer would cause undue hardship; and certain national security or law enforcement related payments. On the same day, Trump also issued an EO calling for the Treasury Department of update guidance and enhance systems for all disbursements to have pre-certification verification processes.

Download Our Take: PwC financial services update – April 04, 2025

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Change remains a constant in financial services regulation. Read "our take" on the latest developments and what they mean.

Current topics – April 04, 2025

1. Digital assets: FDIC and CFTC rescind past guidance; HFSC advances STABLE Act

Download Our Take: PwC financial services update – April 04, 2025

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