/regulation & compliance

News and resources on regulation, compliance, legal and governance issues for banks and fintechs.
Fed extends remit to cover 'novel' technology-driven risks

Fed extends remit to cover 'novel' technology-driven risks

The US Federal Reserve is setting up a new supervisory unit to cover 'complex' technology partnerships between banks and non-banks, crypto activities, and the implementation of blockchain technologies.

The Fed says the goal of the 'novel activities supervision program' is to foster the benefits of financial innovation while addressing risks to ensure the safety and soundness of the banking system.

The programme will take a deep dive into embedded and open banking partnerships where a non-bank serves as a provider of banking products by using APIs that provide automated access to the bank’s infrastructure.

Activities such as crypto-asset custody, crypto-collateralized lending, facilitating crypto-asset trading, and engaging in stablecoin/dollar token issuance or distribution, will also come under the watchdog's gaze.

Banks that provide traditional banking services such as deposits, payments, and lending to crypto-asset-related entities and fintechs can additionally expect more visits from the regulator.

This will be complemented by active oversight of the exploration or use of distributed ledger technology for various use cases such as issuance of dollar tokens and tokenization of securities or other assets.

Also, the Board has provided additional information on the process for a state bank to follow before engaging in certain dollar token or stablecoin activity, including demonstrating that it has appropriate safeguards to conduct the activity safely and soundly.

Comments: (0)

Trending