US Fed steps up oversight of banks’ involvement with crypto firms
The limitations set out in the Federal Reserve’s new Program provides additional measures to its original policy statement laid out in January.
The United States Federal Reserve is broadening the scope of its supervision program which oversees U.S. banks that engage with the cryptocurrency and blockchain industry.
An Aug. 8 announcement by the Federal Reserve Board established the Novel Activities Supervision Program which aims to limit certain crypto-related activities and facilitate a more fair playing field for banks involved with servicing the digital asset industry.
The program is an additional measure to the Board’s Jan. 27 policy statement that aims to ensure all Fed-supervised banks are subject to the same crypto-related limitations.
@federalreserve provides additional information on its program to supervise novel activities in the banks it oversees: https://t.co/6MiItQwO7V
— Federal Reserve (@federalreserve) August 8, 2023
Activities regulated under the program include the custody, lending, trading, issuance or distribution of crypto including stablecoins.
Providing banking infrastructure to digital asset firms or working with companies that use distributed ledger technologies is also regulated, according to a letter from the Board.
The Fed said the objective of the novel activities program is to balance financial innovation with appropriate risk management practices to ensure the safety and soundness of the banking system.
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Registered banks involved in the “risk-based” program may be subject to examination by the Fed Board which will evaluate whether the novel activities are in compliance with its policies and U.S. law.
The policies apply to both insured and uninsured U.S. banks supervised by the Board.
While the program looks to provide stricter oversight on U.S. banks, the Federal Reserve implied that it isn’t discouraging state banks from cutting ties with industry, presumably including the digital asset firm sector.
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