The US Federal Reserve has revealed its long-awaited guidelines on the operational framework for banks to engage with stablecoins, ushering in a new era of digital currencies.
The FED has now paved the way for financial institutions to seamlessly navigate the world of stablecoins, bringing greater stability and efficiency to the rapidly expanding digital economy.
With this regulatory clarification, the stage is set for banks to steer confidently through the dynamic landscape of cryptocurrencies, marking a significant milestone in the integration of traditional banking and the innovative realm of stablecoins.
The move announced on Tuesday defines how the central bank intends to handle its oversight rather than altering the rules for cryptocurrency banking.
It places transactions with the sector under the new “novel activities supervision programme,” where the Fed’s specialists in digital assets will collaborate with the regulator’s regular supervisors.
The Fed also provided a more thorough explanation of why the banks it regulates must obtain prior approval before using stablecoins.
An institution that “issuing, holding, or transacting in dollar tokens to facilitate payments” must first demonstrate to the regulators that it can do so in a “safe and sound manner” and obtain formal approval from the Fed.
Federal Reserve Federal Oversight Boosts CBDCs’ Rise
The US Federal Reserve has implemented new guidelines that demand clearance before all state banks can create, hold, or engage in any transactions with the banks under its supervision. This could signal a fresh beginning for (CBDCs).
The Federal Reserve has released updated data as it works to strike a balance between financial innovation and the best risk management techniques for the banking system’s long-term safety and soundness.
CBDCs, which pose as a digital form of money issued by the government through its central bank, contribute to this story.
The Fed’s latest move is an effort to monitor unusual operations in the banks it regulates. These include partnerships with non-banks that are motivated by technology to offer financial services to customers.
It also includes actions involving distributed ledger, or “blockchain” technology, cryptoassets, and other related technologies.
