US Fed clarifies course of for banks to transact in stablecoins

By Hannah Lang

(Reuters) -State banks which can be a member of the U.S. Federal Reserve system ought to receive a written supervisory nonobjection from the Fed earlier than issuing, holding or transacting in greenback tokens used to facilitate funds, resembling stablecoins, the central financial institution mentioned in a brand new supervisory letter Tuesday.

The Fed additionally mentioned it’s creating a brand new supervisory program to supervise the actions of the banks it supervises associated to cryptocurrency, blockchain expertise and tech-driven nonbank partnerships, with the goal of complementing its present supervisory course of and strengthening the oversight of tech-driven actions.

The brand new bulletins, which have been despatched Tuesday to supervisory and examination workers at Federal Reserve banks and state member banks, comes only a day after funds large PayPal (NASDAQ:) introduced it will launch its personal stablecoin, a sort of cryptocurrency sometimes pegged to a standard asset, typically the U.S. greenback.

Prior makes an attempt by main mainstream corporations to launch stablecoins have met fierce opposition from monetary regulators and policymakers. Meta’s, then Fb (NASDAQ:), 2019 plans to launch a stablecoin, Libra, have been foiled after regulators raised fears it might upset international monetary stability.

For banks to obtain a written nonobjection to have the ability to interact with stabelcoins, banks ought to exhibit applicable danger administration, together with having methods in place to establish and monitor any potential dangers, together with cybersecurity and illicit finance threats, in response to the Fed.

After receiving a written nonobjection, state member banks partaking in greenback token-related actions will proceed to be topic to supervisory assessment in addition to heightened monitoring of these actions, the Fed mentioned.