Institutions as well as individuals are still interested in opportunities to participate in crypto markets despite the fall in crypto prices that have caused the global total crypto market cap to drop from approximately US$2.4 trillion at the start of this year to US$1.1 trillion at press time.
In response to requests for additional information from supervised banking organizations engaging or seeking to engage in crypto-asset-related activities, the Federal Reserve Bank (Fed) has provided additional information.
Crypto markets, on the other hand, offer various opportunities; however, they also pose a number of risks, such as cyber security threats, money laundering, consumer protection issues, legal compliance issues, and technological risks.
Banks are required to demonstrate to the Fed that they are capable of managing crypto-related risks.
The press release stated that: “A supervised banking organization must have adequate risk management, controls, and systems in place prior to engaging in these activities to ensure they are conducted safely and soundly in compliance with all applicable laws, including applicable consumer protection statutes and regulations”.
Also, banking organizations that engage in or want to engage in crypto-related activities must notify the Fed.
According to the Fed release, any supervised bank organization already engaged in cryptoasset-related activities must notify its lead supervisory point of contact at the Federal Reserve immediately about the activity if it has not already done so.
Banking organizations supervised as part of the Federal Reserve system were advised to engage only in lawful crypto-related activities and to comply with all reporting requirements under relevant state and federal laws.
Reserve Banks can use the final guidelines issued by the Federal Reserve Board to review requests for access to accounts at the Federal Reserve and payment services for Federal Reserve customers on August 15, 2022.
Vice Chair Lael Brainard said the new guidelines support a safe, inclusive, and innovative payment system by providing a consistent and transparent evaluation process.
An application for a master account was delayed by Custodia bank, which sued the Federal Reserve Board and the Federal Reserve Bank of Kansas City in June 2022.
Banks can offer a range of financial and new products and services at lower costs by using the master account, which gives them direct access to the Fed’s payment systems.
As a result of the new information released by the Fed and its final guidelines, the crypto markets cannot be ignored any longer.
In order for crypto markets to grow and innovate responsibly, regulators will need to oversee them.
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