The US Federal Reserve is tightening its oversight over crypto banks

The US Federal Reserve has come up with a new plan to oversee the crypto sector and its funding. The plan relates to the approach of banks looking to do business with crypto companies.

While the “Fed” plan doesn’t set any new rules, it does make some things clear. The Fed clearly does not want a repeat of the scenes we saw earlier this year with the collapse of several crypto banks.

More oversight of crypto banks

One of the points that the new plan clarifies concerns stablecoins. Before US banks want to do business with stablecoins, they must first demonstrate that they can do so in a “safe and responsible manner.” It is then up to the Fed to give official approval for this.

It remains to be seen how easy it will be for banks to get the green light for these activities. However, it is expected to be a rigorous process with strict anti-money laundering requirements.

Banking regulators generally do not welcome the crypto industry. The emerging sector is viewed as a potential threat that could harm the traditional banking sector. Regulators therefore prefer a clear barrier between the crypto and banking sectors.

Crypto banks are given space

However, the Fed is leaving the door open for experimentation. Banks are given the opportunity to cautiously enter the crypto waters under strict supervision. The brand new plan also stipulates that the level of oversight will vary depending on the situation. For example, banks that want to take bigger steps in the crypto space will of course also have to deal with more supervision.

As previously mentioned, the Federal Reserve is concerned that more banks will be irresponsibly collaborating with crypto companies. Earlier this year, Silicon Valley Bank, Silvergate, and Signature Bank closed their doors due to liquidity problems. Banks were seen as major investors in the crypto sector.

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