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IPFS News Link • Federal Reserve

Fed Starts New Program to Oversee Crypto Activity in U.S. Banks

• https://www-coindesk-com, By Jesse Hamilton

The U.S. Federal Reserve is starting a new program to oversee banks' crypto activity, and it further clarified its requirement that the lenders under its authority get approval before engaging in digital-assets activities.

The move announced Tuesday doesn't change any rules for crypto banking. Rather, it just defines how the central bank intends to handle its oversight, putting dealings with the crypto sector under the new "novel activities supervision program" in which the Fed's specialized experts in digital assets will work alongside the regulator's regular supervisors.

The Fed also issued a fuller explanation for how the banks it supervises need to get preapprovals 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 all of that in a "safe and sound manner" and needs the Fed to formally sign off.

That permission could be difficult to win, because each bank will need to demonstrate it can "identify, measure, monitor and control the risks of its activities," and the Fed will be looking for any vulnerabilities to money laundering, customer runs and hackers, among other things.

The central bank's announcements were meant to reinforce the crypto guidance it issued in January, and the Tuesday statements come on the heels of PayPal's (PYPL) news that it will roll out its own stablecoin.

U.S. banking regulators have been clear during this administration that they intend to maintain a substantial barrier between the banking system and the crypto sector, though they also 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.