The Fed Launches Novel Activities Supervision Program: Managing Risks of Crypto Engagement
The United States Federal Reserve has introduced the Novel Activities Supervision Program to oversee the involvement of Fed-regulated banks in cryptocurrencies and related technologies. The program aims to strike a balance between allowing innovative financial services and protecting bank customers.
Key Points:
- The Fed aims to ensure banking stability amidst ongoing advancements in crypto and digital technology.
- The program addresses the unique questions and concerns regarding the permissibility and supervision of novel activities.
- Activities such as holding and trading crypto-assets, loans backed by crypto, stablecoin, and dollar token creation are among the areas of focus.
- Banks must have appropriate safeguards in place before engaging in specific dollar token or stablecoin activities.
- The Fed will conduct regular reviews and request specific organizations to undergo examination if necessary.
FedNow Rollout and Increased Scrutiny:
In addition to the Novel Activities Supervision Program, the Federal Reserve recently introduced FedNow, an instant payment service. The Fed’s supervisory teams will oversee and review the new activities undertaken by regulated banks. These teams will periodically evaluate and update which organizations should undergo examination under the program.
However, the introduction of FedNow has faced criticism. US presidential candidate Robert F Kennedy Jr. warned that it could pave the way for “financial slavery and political tyranny.”
Hot Take:
The Fed’s Novel Activities Supervision Program demonstrates its recognition of the evolving landscape of cryptocurrencies and digital technologies. By actively monitoring and regulating these activities, the Fed aims to ensure banking stability while promoting innovation. However, criticisms surrounding FedNow highlight the concerns and debates surrounding the role of central banks in the digital future of finance.
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