The U.S. Federal Reserve on Tuesday provided more advice for banks thinking about engaging in cryptocurrency-related operations, highlighting the need for enterprises to notify the Fed beforehand and ensure that anything they do is legal.
In a statement, the Fed stated that while banks may see “potential opportunities” from cryptocurrencies, they should make sure they have mechanisms in place to make sure the volatile assets do not endanger consumer protections or safety and soundness.
The agency advised that before engaging in any crypto-related operations, banks should also inform the Fed, and any institutions that have already explored crypto projects should inform the Fed about their participation in the digital asset area.
Additionally, the Fed urged state member banks to notify their state regulator before engaging in crypto-activities.
In the supervisory letter, the Fed advised banks it regulates to take a number of precautions before engaging in any crypto-related activity, such as confirming that any proposed activities were lawful and that any necessary filings were required,
The Fed added that in order to ensure that such ventures are done in a safe and sound manner and are compatible with pertinent consumer protection regulations, banks should also have proper risk management systems and controls in place before getting involved in cryptocurrency.
Just a few days prior, a number of Democratic senators, led by Massachusetts Sen. Elizabeth Warren, demanded that the U.S. Office of the Comptroller of the Currency (OCC) withdraw its previously issued crypto guidance and replace it with “a comprehensive approach in coordination with other prudential regulators.”
The Fed and the OCC, two U.S. banking regulators, jointly stated last year that they intended to make it clear in 2022 what kinds of activities banks could engage in involving cryptocurrencies, including whether companies could hold digital assets on their balance sheets and facilitate crypto trades on behalf of clients.
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I do have my own blogs too where I post my articles.
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