The U.S. Federal Reserve is initiating a new initiative to monitor the cryptocurrency operations of banks, the bank said in a press release.
Additionally, the Federal Reserve has provided clearer guidance on the necessity for banks under its jurisdiction to seek approval prior to participating in activities related to digital assets.
According to local reports, the announcement does not introduce any alterations to the existing regulations for cryptocurrency banking. Instead, it outlines the approach that the central bank plans to adopt for its supervision.
This involves placing interactions with the cryptocurrency industry under the purview of the newly established ‘novel activities supervision program.’ Within this program, the Federal Reserve’s specialized professionals in digital assets will collaborate with the regular supervisors of the regulatory body.
The apex bank says if a financial institution is involved in activities such as issuing, holding, or conducting transactions with dollar-backed stablecoins to facilitate payments, it is required to demonstrate to the supervisory authorities that it can execute these actions in a secure and reliable manner. Furthermore, the institution needs formal approval from the Federal Reserve before proceeding.
Every individual bank will be required to showcase its capability to ‘identify, measure, monitor, and control the risks associated with its operations.’ The Federal Reserve will specifically assess vulnerabilities around concerns such as money laundering, potential customer withdrawals, and cyber-security threats, among other relevant factors.
According to local reports, U.S. banking regulators have shown they intend to maintain a substantial barrier between the banking system and the crypto sector, but insist that lenders are welcome to keep experimenting under their close supervision.
The new novel-activities program will inform each bank when its digital-assets exposure is going to come under review, the Fed said.
“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.
Nonetheless the program ‘will help ensure that regulation and supervision allow for innovations that improve access to and the delivery of financial services.’
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