The Federal Reserve launches new regulatory program, banks participating in cryptocurrencies will face stricter scrutiny.
Federal Reserve launches regulatory program for banks involved in cryptocurrencies, imposing stricter scrutiny.
Author: Jesse Hamilton, CoinDesk; Translation: Song Xue, LianGuai
The Federal Reserve is launching a new program to oversee bank activities involving cryptocurrencies and further clarifies that its supervised lenders must obtain approval before engaging in digital asset activities.
The measures announced on Tuesday will not change any rules for cryptocurrency banking business, but simply define how the central bank intends to handle its regulatory matters, placing transactions in the cryptocurrency industry under the “New Activity Supervision Program,” where the Federal Reserve’s digital asset experts will work alongside regular regulatory personnel.
The Federal Reserve has also issued a more comprehensive explanation of how the banks it regulates will need to obtain prior approval to participate in stablecoin transactions. An institution that “issues, holds or trades dollar tokens to facilitate payments” needs to prove to regulatory authorities in advance that it can do so in a “secure and reliable manner,” and requires formal approval from the Federal Reserve.
Obtaining such a license may be difficult, as each bank will need to demonstrate its ability to “identify, measure, monitor, and control the risks of its activities,” and the Federal Reserve will be looking for any loopholes related to money laundering, customer run-offs, and hackers, among others.
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The central bank’s statement aims to strengthen its cryptocurrency guidance issued in January, and Tuesday’s statement was released after LianGuai announced its own stablecoin news.
The U.S. banking regulators have made it clear during this administration that they intend to maintain substantial barriers between the banking system and the cryptocurrency industry, although they also welcome lending institutions to continue experimenting under their close supervision. The Federal Reserve stated that the new activity program will notify each bank when its exposure to digital assets will be reviewed.
The regulatory authorities stated, “The level and intensity of supervision will vary depending on the extent to which each regulated bank organization participates in the new activities.”
Meanwhile, the central bank stated that its new program “will help ensure that regulation and supervision enable innovation and improve access to and provision of financial services.”