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The U.S. Federal Reserve has initiated a fresh program aimed at supervising the cryptocurrency-related operations of banks. Additionally, the Federal Reserve has provided clearer guidelines stipulating that financial institutions under its jurisdiction must obtain approval before participating in any activities involving digital assets.
The announcement on Tuesday brings about no alterations to the regulations concerning crypto banking. Instead, it outlines the approach the central bank plans to adopt in terms of its supervision. This involves subjecting transactions within the crypto sector to the newly established "novel activities supervision program." Within this framework, the Federal Reserve's specialized digital asset experts will collaborate with the regular regulatory supervisors to oversee these activities.
The Fed also issued a fuller explanation for how the banks it supervises need to get pre-approvals for engaging with stablecoins. An institution that’s “issuing, holding, or transacting in dollar tokens to facilitate payments” needs to prove to the supervisors beforehand that it can do it in a “safe and sound manner” and needs the Fed to formally sign off.
Obtaining that permission might pose a challenge, as each bank will be required to showcase its capability to "identify, measure, monitor and control the risks of its activities." The Federal Reserve will meticulously examine any susceptibilities to issues such as money laundering, sudden customer withdrawals, cyberattacks, and other related concerns.
The central bank's recent statements aim to strengthen the cryptocurrency guidelines it released in January. These remarks on Tuesday closely follow the announcement from PayPal about its upcoming stablecoin launch.
During this administration, U.S. banking regulators have consistently emphasized the importance of upholding a significant demarcation between the conventional banking realm and the cryptocurrency sector. However, they also emphasize that financial institutions are encouraged to continue their innovative pursuits while operating under vigilant oversight. The recently introduced novel-activities program, as stated by the Federal Reserve, will ensure that each bank is duly notified when its involvement with digital assets is scheduled for evaluation.
"The level and intensity of supervision will vary based on the level of engagement in novel activities by each supervised banking organization," according to the regulator.
Meanwhile, the central bank said its new program "will help ensure that regulation and supervision allow for innovations that improve access to and the delivery of financial services."
