The U.S. Federal Reserve published additional information on its novel activities supervision program, clarifying requirements that banks will have to provide if they intend to engage with the digital asset sector.
In a Tuesday announcement, the central bank said it would integrate the program into its existing supervisory process, designating program experts to work alongside those teams supervising banks engaged in novel activities.
The Fed defined “novel activities” as those that include complex, technology-driven partnerships with non-banks to provide banking services to customers; and activities that involve crypto-assets and distributed ledger or “blockchain” technology.
“The goal of the novel activities supervision program is to foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system,” said the central bank.
The degree of supervision will be risk-based, with the Fed notifying certain banks that their activity will be routinely monitored, depending on the extent of their engagement with these firms.
The new guidance also laid out the process by which a state bank can meet certain requirements before venturing into dollar-token or stablecoin activity. These banks will have to receive a written notification of supervisory non-objection from the Federal Reserve before engaging in these activities.
Many in the crypto community viewed the development as a net positive for the industry, with the central bank’s guidance stating that the Office of the Comptroller of the Currency (OCC) recognizes the authority of banks on distributed ledger technology to conduct payments by issuing, holding and transacting in tokens.
The Federal Reserve is giving banks a clear path on how to handle crypto.
By legitimizing the tech, more traditional financial institutions will explore and adopt it.
— odin free 🦇🔊 (@odin_free) August 8, 2023