In a move to bolster supervision over cryptocurrency activities within the banks under its purview, the Federal Reserve has unveiled a new supervisory initiative. Alongside this, the U.S. central bank has issued comprehensive guidelines for banks to observe before partaking in the issuance, possession, or trading of U.S. dollar stablecoins.
Federal Reserve Intensifies Cryptocurrency Oversight The Federal Reserve made public the launch of the Novel Activities Supervision Program on Tuesday, aimed at elevating scrutiny over emerging activities within financial institutions under its regulatory umbrella. The Fed elaborated:
This program will concentrate on innovative endeavors linked to crypto-assets, distributed ledger technology (DLT), and intricate, tech-driven collaborations with nonbank entities facilitating financial services for consumers.
Furthermore, the central bank underscored that this program “will adopt a risk-focused approach and complement existing supervisory frameworks.”
Simultaneously, on Tuesday, the Federal Reserve Board rolled out directives mandating banks to meet specific prerequisites before engaging in activities concerning the issuance, possession, or transactions involving U.S. dollar stablecoins.
The Fed outlined: “The Board furnished further insights into the procedures for a state-chartered bank supervised by the Federal Reserve to adhere to before participating in particular dollar token or stablecoin ventures, including furnishing evidence to its Federal Reserve overseers of possessing adequate safeguards for conducting such activities securely and prudently.”
The Fed’s announcement follows closely on the heels of Paypal’s
declaration of its intention to introduce a U.S. dollar stablecoin. According to the payments behemoth, “Paypal USD (PYUSD) is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars.”
Meanwhile, there’s ongoing deliberation in Congress concerning stablecoin regulation. The House Financial Services Committee recently passed the Clarity for Payment Stablecoins Act. Congressman Patrick McHenry (R-NC), the bill’s sponsor, remarked: “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. That’s why it’s more important than ever that Congress enact legislation to provide comprehensive digital asset regulation, especially for stablecoins.”
What are your thoughts on the Federal Reserve’s ramped-up oversight of cryptocurrency activities and U.S. dollar stablecoins? Share your views in the comments below.
TAGS: Federal Reserve, Cryptocurrency Oversight, Dollar Stablecoins, Banking Regulations, Financial Supervision