services themselves. i certainly recognize and appreciate these challenges. but before a bank begins to engage in or offer crypto - asset - related services, it must seriously and carefully consider the risks involved — both to the bank and its customers. the recent turmoil in the digital - asset industry only underscores that point. federal reserve staff is working to articulate supervisory expectations for banks on a variety of digital asset - related activities, including custody of crypto - assets facilitation of customer purchases and sales of crypto - assets loans collateralized by crypto - assets, and issuance and distribution of stablecoins by banking organizations. we understand that everyone involved in this space is seeking clarity. one of the most important tools that we have as a regulator is the ability to clearly articulate our supervisory expectations. it is also our most direct path to encouraging and supporting responsible innovation. earlier this week, we released supervisory guidance addressing banks that are engaging in or seeking to engage in crypto - asset related activities. 3 this guidance will provide banks with additional information about the risks of crypto activities and remind them to ensure that the activities are legal, and they should have adequate systems, risk management, and controls in place to conduct the activities in a safe and sound manner consistent with applicable law. critically, one important element of this release is that firms should contact their supervisors about these types of activities and expect that supervisory staff will provide timely feedback, as appropriate. 2 / 4 bis central bankers'speeches based on my conversations with bankers across the country, i believe that providing the rules of the road — highlighting the risks we are most concerned about and laying out our expectations for how those risks should be managed — is invaluable for banks considering whether and how to innovate. artificial intelligence the federal reserve is taking a similar approach with respect to banks'use of ai. last year, the fed joined with four other financial agencies to issue a request for information and comment on financial institutions'use of artificial intelligence, including machine learning. 4 as noted in that document, banks are using ai in a variety of ways, including fraud monitoring, personalization of customer services, credit decisions, risk management, and textual analysis. these applications of ai can, to varying degrees, involve risk - management challenges around issues such as explainability, data governance, cybersecurity, third - party risk management, and consumer compliance. the banking agencies received over 100 responses to the request for information. those responses

##ness, posing a threat to safety and soundness just as innovating recklessly can. the fed supports responsible innovation in a variety of ways, and i will mention a few of them in this discussion. for the past few years, i have been working to assist banks to address the challenges brought by the process of partnering with a third - party service provider. last year, the fed, along with the office of the comptroller of the currency and the federal deposit insurance corporation, proposed interagency guidance to assist in the management of risks involved in third - party engagement. the agencies received over 80 comment letters and are reviewing those comments as we move toward finalizing the guidance. in my view, it is especially helpful to provide clarity for banks in these kinds of relationships and to help them establish a solid 1 / 4 bis central bankers'speeches foundation as banks and fintechs continue to engage in partnerships. last year at this time, the federal banking agencies released a guide designed to assist community banks to assess risks in constructing and considering relationships with fintech companies. and lastly, this past september, the federal reserve published a paper detailing industry perspectives and experiences on the different types of partnerships between community banks and fintech companies. 2 we conducted extensive outreach with community banks, fintechs, and other stakeholders and incorporated real world experiences of the strategic and tactical decisions that led to effective partnerships. for the remainder of my remarks, i will focus on several issues that are likely top of mind for those who are engaged in financial services innovation. crypto - assets let's start with digital and crypto - assets. i am hearing more discussions involving banks'interest in offering services involving crypto - assets. the chatter seems to originate more from those outside the banking industry, but i'll put that aside for now. there seem to be a number of reasons for this interest and why customers might seek to engage in this type of activity. first, although the interest seemed to have cooled lately, given recent developments in the crypto industry, we have seen significant consumer demand for engagement in these types of services. it seems reasonable that because bank customers are aware of crypto and have discussed these assets with their banks, banks want to better understand this type of engagement and potentially provide those services to their customers. second, we have also been told that banks have observed their deposits flowing to nonbank crypto - asset firms and, understandably, would like to stem that outflow by offering the