Federal Reserve Launches New Program to Oversee Crypto Activities of Banks – The Federal Reserve explained on August 8th that the term “novel activities” encompasses intricate, technology-centered collaborations with non-bank entities. These collaborations offer banking services to customers and encompass actions related to cryptocurrencies and blockchain technology.
The Federal Reserve expressed its objective as promoting the advantages of financial innovation, all the while acknowledging and effectively managing risks to ensure the stability of the banking system. This approach contrasts with the actions of the Securities and Exchange Commission, which aims to suppress the digital asset industry in the United States.
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Furthermore, the Federal Reserve Board furnished additional details about the procedure that state banks need to adhere to prior to participating in any endeavors related to stablecoins. They would need to demonstrate to the central bank that they have “appropriate safeguards to conduct the activity safely and soundly.”
Partner at Moses Singer law firm, Howard Fischer, told Bloomberg, “The fear is that engagement with such volatile assets could put the traditional banking sector at risk,” This action could have consequences for banks in crypto-friendly states that remain under Federal Reserve jurisdiction. Furthermore, experts in the field have pointed out potential risks associated with this initiative.
Under Federal Reserve supervision, the central bank will possess the authority to halt or undo transactions that it perceives as fraudulent or high-risk. The program will bestow banks with increased authority over cryptocurrency on-ramps and off-ramps, potentially resulting in a complete exclusion of the industry from the banking system in the United States, as some individuals suggest.
In the same week, PayPal unveiled its stablecoin called PYUSD, a move that drew criticism from the crypto community due to concerns about centralization and PayPal’s power to reverse transactions. Additionally, Moody’s ratings agency recently lowered the ratings of ten American banks and is evaluating the possibility of downgrading six larger ones. Looking at the crypto market, it has experienced a 1.7% increase, pushing its total value to $1.22 trillion.
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This movement maintains the market’s position within a range-bound trading channel that has persisted for five months. Despite Bitcoin briefly touching $30K, it was unable to overcome resistance and has retraced to $29,729. While the rest of the market has seen slight gains, it has managed to recover from losses incurred over the past week, resulting in a sideways trend.