Following the US banking crisis, the Fed will be paying more attention to crypto-related banks.
The US Federal Reserve (Fed) is intensifying its watch on domestic banks' affiliations with cryptocurrency and blockchain businesses, introducing a refined oversight mechanism.
Announced on August 8th, the Federal Reserve Board unveiled its Novel Activities Supervision Program. This initiative's primary objective is to regulate specific cryptocurrency-related ventures, ensuring a fair playing field for banks engaging with the digital currency sector.
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Incorporating the Board's policy statement from January 27th, this program aims to universally apply crypto-related restrictions to all Federal Reserve-supervised banks.
Delving into the activities under the program's purview, they encompass crypto and stablecoin issuance, custody, distribution, lending, and trading.
The Board's clarification letter further elaborates that partnerships providing banking structures to digital currency entities or collaborations with companies employing distributed ledger technologies are also under regulation.
Emphasizing the program's goal, the Fed stated that it aims to merge financial innovation with suitable risk management measures, safeguarding the robustness of the banking system.
Banks registered under this "risk-based" program will undergo a detailed review by the Federal Reserve Board. This examination will assess whether these banking establishments' unique activities align with US policies. Notably, these policies encompass insured and non-insured banks under the Board's supervision.
The Federal Reserve's move towards a tighter supervisory lens on US banks interacting with the crypto realm showcases a balancing act between fostering innovation and ensuring the banking system's resilience. It can be assumed that tighter supervision of crypto-related banks comes after, in March, several banks like Sivergate and Signature Bank collapsed.
While the oversight may appear stringent, the Federal Reserve's intent is not to deter state banks from maintaining associations with the evolving digital asset industry.
