The Federal Reserve has announced plans to oversee new activities that include cryptocurrencies and other emerging asset classes.
It also covers the application of distributed ledger technology, which has the potential to have a significant impact on the financial system, to strengthen regulation of banks’ participation in digital assets, the latest move by U.S. regulators to limit banks’ participation in cryptocurrencies.
Banks that are members of the Federal Reserve System should obtain a written regulatory no objection from the Fed before issuing, holding or trading dollar-based tokens used to facilitate payments, such as stablecoins, according to a published outline of the program’s goals.
Such banks must demonstrate that they have taken appropriate measures to mitigate risks, including liquidity, cybersecurity and illicit financial risks, and demonstrate that they monitor these issues on an ongoing basis.
Additionally, regulators will increase oversight of new activities such as crypto asset custody, crypto collateralized lending, facilitating crypto asset trading, and participation in stablecoin/USD token issuance or distribution.
The plan will also focus on distributed ledger technology (DLT) and other technology-driven partnerships with non-bank institutions to provide financial services to customers.
The Fed said it was working on a new regulatory program.
To oversee the activities of banks in its system with regard to cryptocurrencies, blockchain technology and technology-enabled non-bank partnerships, with the aim of complementing its existing supervisory processes and enhancing technology-driven regulation.