US Federal Reserve Tightens Regulation Over Bank-Crypto Relations

US Federal Reserve Tightens Regulation Over Bank-Crypto Relations
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In a recent move, the United States Federal Reserve has taken steps to tighten its control over how banks interact with cryptocurrencies like Bitcoin (BTC). This decision aims to make sure that these interactions are safe and well-regulated.

If you’re a member bank of the US Federal Reserve and you’re planning to deal with certain types of cryptocurrencies, like stablecoins (digital tokens pegged to real-world assets), you now need to get written permission from the Federal Reserve before diving in.

This means that state banks under the Federal Reserve system must get the nod before they can issue, hold, or carry out transactions involving dollar-linked tokens like stablecoins, which are a type of cryptocurrency that’s often linked to traditional assets like the US dollar.

Federal Reserve Takes Stricter Stance on Crypto Relations

To ensure that these regulations are followed, the Federal Reserve is creating a new program that will keep an eye on how banks work with cryptocurrencies, blockchain technology, and partnerships with tech companies. This program will work alongside the bank’s existing supervision process, making sure that everything is done safely.

Federal Reserve Takes Stricter Stance on Crypto Relations

This decision comes shortly after PayPal, a big company that handles online payments, launched its native stablecoin. This type of move has faced challenges before. For instance, a few years ago, Facebook tried to launch a stablecoin called Libra, but regulators were concerned that it could disrupt the global financial system.

Moreover, for banks to get permission to work with stablecoins, they need to show that they can manage the risks involved. This includes having systems in place to detect and prevent cybersecurity threats and illegal financial activities. Even after they get approval, these banks will still be closely monitored to ensure they’re following the rules.

The central bank wants to make it clear what it expects from banks when it comes to dealing with cryptocurrencies. The recent announcements provide more detailed guidance on how banks should handle activities related to digital assets.

These moves by the US Federal Reserve are part of its ongoing efforts to adapt to the changing landscape of financial services and technology. They claim to build upon earlier policies released in January that set the boundaries for certain activities involving cryptocurrencies, promoting a fair environment for all banks under its supervision.


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