India Buzz Channel

US Federal Reserve Increases Regulation of Crypto and Stablecoin Activities

<p>The United States Federal Reserve has announced new measures that require state banks that are members of the Federal Reserve system to obtain written supervisory nonobjection prior to issuing, holding, or engaging in transactions involving dollar tokens used for payment facilitation, such as stablecoins. This is done in an effort to improve regulatory oversight and risk management in the rapidly evolving cryptocurrency space. In light of the increasing importance of cryptocurrencies and similar technology, the central bank’s declaration, which was detailed in a supervisory letter on Tuesday, emphasizes its commitment to preserving the integrity of the financial system.<img decoding=”async” class=”alignnone wp-image-126170″ src=”” alt=” download 2023 08 14t172245.418 11zon” width=”1211″ height=”678″ srcset=” 300w,×84.jpg 150w” sizes=”(max-width: 1211px) 100vw, 1211px” title=”US Federal Reserve Increases Regulation of Crypto and Stablecoin Activities 12″></p>
<p>A thorough supervisory scheme to monitor banks’ actions using cryptocurrencies, blockchain technology, and technology-driven collaborations with nonbank businesses has also been announced by the Federal Reserve. The goal of this program is to strengthen the monitoring and supervision of tech-driven financial activities that might have an impact on the whole financial system while enhancing the current supervisory framework.</p>
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<p>The timing of these announcements is significant since they occur soon after PayPal, a well-known supplier of payment services, announced its plans to launch its own stablecoin, a sort of cryptocurrency that is often tethered to the US dollar. Financial authorities and politicians have historically opposed attempts by mainstream firms to introduce stablecoins because of worries about possible disruptions to global financial stability.</p>
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<p>The situation of Meta (formerly known as Facebook) and its 2019 plan to launch Libra, a stablecoin meant to be incorporated within the social media giant’s ecosystem, is a salient example of such regulatory opposition. Regulators voiced concerns over the possible systemic dangers presented by Libra, which prompted significant changes to the project and ultimately resulted in its renaming as Diem.</p>
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<p>According to the recently released rules from the Federal Reserve, institutions requesting authorization to work with stablecoins must exhibit effective risk management procedures. This entails setting up and maintaining systems that can recognize and track possible hazards, with a focus on cybersecurity and dangers associated with illegal financial activity. State member banks engaged in operations related to dollar tokens will continue to be subject to continuing supervisory evaluations and increased monitoring of these undertakings after obtaining written nonobjection from the Federal Reserve.</p>
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<p>In conclusion, the US Federal Reserve’s most recent statements demonstrate how committed it is to preserving the stability and safety of the financial system despite the changing nature of cryptocurrencies and blockchain technology. The central bank intends to strike a balance between promoting innovation and preserving financial stability by instituting greater control on stablecoins and developing a specific supervisory program for crypto-related activity. Financial institutions and governments from all around the globe are expected to carefully watch the Federal Reserve’s strategy as a possible model for resolving similar difficulties as the bitcoin ecosystem continues to evolve.</p>
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