Federal Reserve

source: gomarkets.com

The Federal Reserve is stepping up its oversight of banks that are involved in cryptocurrency and stablecoin activities. They’ve introduced a new program called the “Novel Activities Supervision Program,” which aims to strengthen the monitoring of all the banks they oversee.

In this new program, the Federal Reserve will pay close attention to activities related to crypto, distributed ledger technology (that’s like the tech behind cryptocurrencies), and partnerships between banks and nonbanks that use technology to offer financial services to customers.

The reason behind this extra supervision is that new and innovative things happening in the banking world can bring about risks that need to be carefully managed. The Federal Reserve wants to make sure that these new activities don’t harm the safety and stability of the banking system.

The interesting thing is that banks participating in these new activities won’t be put into a separate category for supervision. Instead, the program will work alongside the existing supervisory teams and portfolios. The goal is to make sure that while innovations are encouraged, they’re also safe and don’t cause problems for customers or the financial system as a whole.

Federal Reserve
Federal Reserve

The Federal Reserve also wants to make sure that supervised state banks that want to get involved in stablecoin activities (that’s a type of cryptocurrency tied to a stable asset like the US dollar) have good practices in place. This includes being ready to handle things like cybersecurity risks, having enough money available (liquidity) to cover transactions, following rules that protect consumers, and making sure they’re not getting involved in any illegal financial activities.

This move from the Federal Reserve comes after some discussions in the House Financial Services Committee about how to regulate stablecoins. They’re trying to come up with rules that everyone can agree on to make sure stablecoins are used safely and responsibly.