Federal Reserve Launches Crypto Oversight Program With New Guidelines
The Federal Reserve has launched its Novel Activities Supervision Program in a proactive move towards strengthening the crypto oversight program. The United States central bank also released guidelines for banks, before engaging in the issuance, possession, or transactions in dollar-backed stablecoins.
Fed Bolsters Supervision on Crypto Activities
The Federal Reserve announced the Novel Activities Supervision Program on Tuesday, to increase scrutiny over financial undertakings within its purview. The initiative will focus on crypto-assets, distributed ledger technology (DLT), and intricate tech-driven partnerships with nonbanks, to enhance customer financial services. The Federal Reserve explained:
"The program will focus on novel activities related to crypto-assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with nonbanks to deliver financial services to customers."
The central bank also underlined that the program “will be risk-focused and complement existing supervisory processes.”
The Federal Reserve Board issued comprehensive directives on Tuesday, stipulating prerequisites for banks embarking on ventures involving US dollar stablecoins. These guidelines underscore the imperative of establishing prudent safeguards and conducting such activities securely, further buttressing the integrity of the financial system.
The Federal Reserve Board detailed: “The Board provided additional information on the process for a state bank supervised by the Federal Reserve to follow before engaging in certain dollar token or stablecoin activity, including demonstrating to its Federal Reserve supervisors that it has appropriate safeguards to conduct the activity safely and soundly.”
The recent developments underscore the urgency of these measures after PayPal unveiled its US dollar stablecoin, "PayPal USD (PYUSD)."
“PayPal USD (PYUSD) is fully backed by US dollar deposits, short-term US treasuries, and similar cash equivalents, and can be redeemed 1:1 for US dollars,” the payments giant explained.
Stablecoin Bill Passed Amid Growing Regulatory Focus
The House Financial Services Committee recently passed the Clarity for Payment Stablecoins Act, an assertive stride towards streamlined regulation. Congressman Patrick McHenry (R-NC), the bill's proponent, underlines the pivotal role of comprehensive legislation in empowering stablecoins to realize their full potential. McHenry said:
“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 is your take on the Federal Reserve's increasing oversight of crypto activities and USD stablecoins? Please share your thoughts and opinions in the comments section below.
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