The Federal Reserve has established a new supervisory program to increase oversight of crypto activities by the banks it regulates. The U.S. central bank also released additional guidelines for banks to follow before engaging in the issuance, possession, or transactions involving U.S. dollar stablecoins.
Fed Steps up Crypto Oversight
The Federal Reserve announced the establishment of the Novel Activities Supervision Program on Tuesday to increase oversight of novel activities by the financial institutions under its supervision. The Fed 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.
Moreover, the central bank stressed that the program “will be risk-focused and complement existing supervisory processes.”
On Tuesday, the Federal Reserve Board also released guidelines mandating banks to adhere to certain requirements prior to engaging in the issuance, possession, or transactions involving U.S. dollar stablecoins.
The Fed 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 Fed announcement came after Paypal said it will launch a U.S. dollar stablecoin. “Paypal USD (PYUSD) is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars,” the payments giant described.
Meanwhile, Congress is considering a stablecoin bill. The House Financial Services Committee recently passed the Clarity for Payment Stablecoins Act. Congressman Patrick McHenry (R-NC), who introduced the bill, 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.”
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