Monday, December 5, 2022
HomeLaw & PoliticsUS Fed releases guidelines for banks planning to engage in crypto activity

US Fed releases guidelines for banks planning to engage in crypto activity

On August 16, the US Federal Reserve Board issued additional guidance to banking institutions that are engaged in or intend to participate in crypto-asset-related operations, stating that institutions must alert the central bank before investing in such assets.

The developing crypto-asset industry offers significant possibilities for banks, their clients, and the wider monetary system. Nevertheless, it may also cause harm in terms of security and soundness, consumer safety, and economic stability.

The US central bank’s supervision statement, released on August 16, details the measures that board-supervised institutions must follow before engaging in crypto-asset-related operations, including establishing whether such actions are legally acceptable or if any regulatory filings are necessary.

Before starting these operations, banks must have suitable systems and control measures in place to undertake crypto-asset-related actions in a secure and sound way.

As various financial organisations and central banks have expressed concerns about the financial risks associated with digital money transactions, such as cryptocurrencies, crypto transactions are becoming more relevant.

Previously, Shaktikanta Das,Governor of the Reserve Bank of India, has stated that cryptocurrencies are an obvious hazard and anything that generates value from make-believe, with no foundation, is simply speculation disguised as a smart term.

The scope and nature of the crypto industry are fast expanding, and if present trends persist, it could pose a danger to economic stability, according to the European Central Bank.

The value of the popular trading digital commodity Bitcoin has fallen drastically from its all-time peak in recent months, leaving investors in the red. Most other famous crypto-assets have also lately witnessed greater drops.

Crypto-assets, such as stablecoins, are rapidly changing. The latest instability in crypto-asset markets illustrates their inherent unpredictability, structural weaknesses, and the problem of their growing interconnection with the traditional financial system, according to the Financial Stability Board. 

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