The U.S. Federal Reserve is ready to take a deep dive into the crypto industry, overseeing banks’ involvement with cryptos through a newly launched program, according to the regulator’s announcement on Tuesday. It’s a clear indication that they’re paying more attention to what’s happening in the world of digital assets.
To start, the Fed’s has declared it rules haven’t been altered for crypto banking, but the approach in overseeing it has been defined. They’ve fashioned a supervision program for so-called “novel activities.” This unit will work alongside the regulator’s established supervisors, tapping specialized experts in digital assets. This collaborative approach, in theory, will ensure crypto activities conducted by banks strike a balance between innovation and regulation.
Furthermore, the Federal Reserve has detailed the process of banks obtaining the necessitated permissions for crypto transactions. Banks wishing to carryout any form of transaction including issuing, holding, or facilitating payments with dollar tokens must demonstrate proof of compliance with the Fed’s standard, implying that such activities should occur in a “safe and sound manner.” This implies that the Fed is eager to embrace the potential of digital assets, but not without caution or understanding of the risks involved.
Interestingly, these announcements have closely tailed PayPal’s revelation about launching its own stablecoin. While this could be coincidental, it might also represent the Fed’s response to an increasing number of traditional financial institutions entering the crypto arena, such as PayPal.
In essence, it seems the Federal Reserve is keen to observe, understand, and yet scrutinize cryptos, particularly as it becomes interwoven into the regular banking and payment sector. This could potentially pave the path to tighter regulation, reflecting thorough measures to ensure safety, but out of concerns, it might throttle innovation.
At first glance, this strategic move by the Fed seems to emerge more from vigilance than from veering off the cryptos. Thus, the question hints on whether this balancing act between fostering innovation whilst ensuring regulatory compliance will offer a fertile ground for financial institutions to flourish within the crypto space. It is still an evolving story, so to speak, with potential implications for the whole digital asset market. Therein lies the essence of the announcement, a delicate equilibrium between the embrace and the oversight of the crypto world by regulators.
Source: Coindesk
