Fed Launches New Crypto Oversight Programme for US Banks
New crypto guidelines from the U.S. central bank don’t change policy, but it does clarify what the Fed wants from financial institutions.
The U.S. Federal Reserve is launching a new programme to monitor cryptocurrency activity at financial institutions, and it has made it clear that any financial institution operating under its watch must first get permission to deal in digital assets.
The move, which was announced on Tuesday, does not alter any existing rules for crypto banking; rather, it defines how the central bank intends to handle its oversight, placing transactions involving cryptocurrencies under a new “novel activities supervision programme” in which the Fed’s specialised experts in digital assets will work alongside the regulator’s regular supervisors.
The Fed also provided a more detailed description of how the institutions it regulates must get prior clearance before doing any activity with stablecoins.
Each bank will have to prove it can “identify, measure, monitor, and control the risks of its activities,” and the Fed will be looking for any weaknesses in terms of money laundering, client runs, and hackers, among other things.
The Fed’s comments on Tuesday were supposed to back up its crypto recommendations from January, and they follow on the heels of PayPal’s announcement that it would launch its own stablecoin.
The current administration of U.S. financial authorities has made it very apparent that it intends to preserve a sizable wall between the banking system and the crypto sector, while simultaneously insisting that lenders are free to keep experimenting under their strict oversight. The Fed has announced a new novel activities programme that will alert financial institutions when their exposure to digital assets may be subject to examination.
For each regulated financial institution, “the level and intensity of supervision will vary based on the level of engagement in novel activities,” the regulator has said.