The Fed opened the way for banks to interact with crypto
As U.S. regulators continue to take a positive stance toward digital assets, the U.S. Federal Reserve has issued 2023 guidance that limits how federally regulated banks, including uninsured ones, can engage with crypto.
In the year The 2023 directive requires uninsured banks to follow the same rules as federally insured institutions, based on the principle that similar activities pose similar risks and should be subject to similar supervision.
This prevented uninsured banks from performing unauthorized activities for national banks, such as crypto services, which automatically terminated Fed membership because the institution's core activities were not authorized.
The Fed says that the financial system has improved since 2023
The Fed said the main reason for issuing the guidance was that it was out of date and “the financial system and the board's awareness of new products and services is growing”.
“Consequently, the 2023 policy statement is inappropriate and stands cancelled,” he said.
Caitlin Long, CEO of crypto-focused Custodia Bank, hailed the move in an interview with XPost on Wednesday, explaining the 2023 directive was the reason her institution's application for a master account was previously rejected.
A master account with the Fed allows a financial institution to hold balances directly with the US central bank and use its primary payment systems, allowing payments to be made in central bank funds rather than relying on another bank as an intermediary.
RELATED: Trump's view on interest rates doesn't hold ‘no weight' at the Fed: Hassett
“The feds broke the law by citing this directive in the Custodia denial, even though the directive hasn't been made public yet, that's not until February 2023,” Long said.
But most of the group is now gone or disappeared under federal jurisdiction. Nature is healing. Thank you VCS Bowman and Gov Waller!” she added.
A new guide to increase banking innovation
The move on Wednesday comes after the Federal Reserve issued new guidance to insured and uninsured regional member banks regulated by the Federal Reserve to track “innovative activities” like cryptocurrencies, according to the Fed's statement on Wednesday.
“By paving the way for responsible, innovative products and services, the Board is helping the banking sector remain safe and sound, as well as modern, efficient and effective,” said Michelle Bowman, vice chair of federal oversight.
The decision of the federation was not unanimous
Fed Governor Michael Barr opposed the decision, arguing that the principle of equal treatment among banks would protect a level playing field and prevent regulatory arbitrariness.
“This principle remains true today. Therefore, I cannot agree to repeal the current policy statement and take a new decision, which, in practice, promotes regulatory abuse, distorts the playing field and promotes the wrong incentives to maintain financial stability. I do not agree,” he said.
Barr is accused of having ties to Operation Chokepoint 2.0, a federal effort to force crypto companies out of the bank. However, he was previously an advisor to Ripple and pushed for responsible stablecoin regulation.
Journal: Unstable Coins: Debasement, Bankruptcy and Other Risks Looming.
