US Federal Reserve Intensifies Supervision of Banks’ Engagement with Cryptocurrency Firms

In a bid to foster a regulated and equitable environment within the ever-evolving cryptocurrency and blockchain domain, the United States Federal Reserve has taken a significant stride by enhancing its oversight program for US banks engaging with the digital asset industry.

Marking its latest move on August 8th, the Federal Reserve Board introduced the Novel Activities Supervision Program, an initiative designed to refine the parameters of crypto-related activities. The overarching objective of this program is to establish a level playing field, curbing specific crypto-related activities and promoting fair practices for banks actively involved in serving the digital asset sector.

The program is a supplementary endeavor following the Federal Reserve Board’s initial policy statement of January 27th, which aimed to ensure uniformity in the application of crypto-related limitations across all Fed-supervised banks.

The spectrum of activities that come under the purview of this program encompasses custody, lending, trading, issuance, or distribution of cryptocurrencies, including stablecoins. Moreover, the provision of banking infrastructure to digital asset firms and collaboration with entities employing distributed ledger technologies are also regulated, as per a communication from the Board.

The Federal Reserve underscores the core objective of the novel activities program: striking a delicate balance between financial innovation and effective risk management to safeguard the stability and integrity of the banking system.

Banks that are registered participants in this “risk-based” program might undergo examination by the Fed Board to ensure alignment with its policies and adherence to US laws. This initiative extends to both insured and uninsured US banks under the regulatory supervision of the Board.

Importantly, while the program is oriented toward bolstering regulatory oversight within US banks’ crypto engagements, the Federal Reserve has indicated that this move should not be interpreted as discouragement for state banks to sever ties with the broader industry, which presumably includes the digital asset sector. This stance reflects the Federal Reserve’s commitment to promoting an environment of balanced progress and innovation while safeguarding systemic stability.

For more news, find me on Twitter or subscribe to my YouTube channel.

What is your opinion on this issue? Leave me your comment below! I’m always interested in your opinion!

Leave a Reply

Your email address will not be published. Required fields are marked *

Recommended for you