- The Federal Reserve Board eliminated a 2022 requirement for banks to notify it before engaging in cryptocurrency activities, allowing routine supervision to monitor these operations instead.
- A 2023 rule requiring banks to obtain approval for dollar token activities was rescinded, simplifying the process for banks to work with digital dollar technologies.
- The Federal Reserve, with other regulators, withdrew two 2023 joint statements on banks’ crypto risks, signaling a more flexible approach to support innovation while planning new guidance.
The Federal Reserve Board made a significant move on Thursday to simplify rules for banks engaging with cryptocurrencies and digital dollar tokens, aiming to foster innovation while keeping risks in check, a decision that affects how banks interact with these digital assets. In plain terms, cryptocurrencies like Bitcoin or XRP are digital forms of money that operate on secure, decentralized technology, and dollar tokens are digital versions of the U.S. dollar backed by assets to maintain a stable value. Previously, in 2022, the Federal Reserve required banks under its oversight to notify it in advance if they planned to work with cryptocurrencies, ensuring the Fed could review potential risks like fraud or instability. However, this requirement has now been eliminated, meaning banks can handle crypto activities without prior notification, and the Fed will instead monitor these activities during routine bank examinations, treating them like other banking operations.
Additionally, the Federal Reserve scrapped a 2023 rule that required banks to get a formal “nonobjection” approval before engaging in dollar token activities, such as issuing or managing digital dollars on blockchain networks. This change removes a layer of bureaucracy, making it easier for banks to explore these technologies. The Federal Reserve, alongside the Federal Deposit Insurance Corporation, also aligned with the Office of the Comptroller of the Currency to withdraw two 2023 joint statements that outlined strict guidelines for banks’ crypto activities and risk exposures. These statements had set a cautious tone, emphasizing the need for banks to manage risks carefully. By stepping back from these, the agencies are signaling a more flexible approach, though they plan to collaborate on new guidance to support safe innovation in this space.
This shift reflects the Federal Reserve’s recognition that the crypto landscape is evolving rapidly, with banks increasingly interested in offering services like crypto custody or tokenized dollar transactions. By streamlining oversight, the Fed aims to encourage banks to innovate while ensuring risks are managed through standard supervision, balancing the potential of digital assets to transform finance with the need for stability in the banking system.
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