In a policy released today, the Federal Reserve has announced additional crypto banking regulations. Due to worries about security, the authorities have created a new policy that forbids the integration of digital assets into regulated banks.
To address the integration of digital assets into the federal banking sector, the Federal Reserve Board today published a final rule that interpreted Section 9(13) of the Federal Reserve Act. The Federal Reserve imposes rules and limitations on its member banks in this area.
The Federal Reserve has announced additional crypto banking regulations in a final rule that was published today. The final rule states that the rules were developed in response to “a number of inquiries, notifications, and proposals from state member banks,” concerning “crypto-asset-related activity.”
The banks that are members of the Federal Reserve are state-level financial organizations that adhere to the system’s rules. These institutions are additionally governed by 12 separate regional banks located all around the nation.
The rule makes two distinct additions to the legislation already in place at the Fed. The board first forbids member banks from holding digital assets. Second, member institutions that want to use these assets must first secure specific approval and demonstrate the validity of particular security components.
“Significant risks” are mentioned in the issued rule concerning the crypto asset market. Undoubtedly referring to the illicit behavior that was found throughout the previous year, this proves to be a significant negative mark against the sector as it recovers in 2023.
The rule adds that “it is particularly important for a state member bank to have in place appropriate systems to monitor and control risks,” regarding crypto. Additionally, stating that “the Financial Stability Oversight Council has observed that, in the absence of a fundamental economic use case, the value of most crypto-assets is driven largely by sentiment and future expectations, and not by cash flows from providing goods or services outside the crypto-asset ecosystem.”
