Federal Reserve Unveils Oversight On Crypto, Tech In Banking

The Federal Reserve Board unveiled further details on Tuesday regarding its program to supervise novel activities in the banks it oversees.

These encompass intricate, technology-driven collaborations with non-banking entities to offer banking services, as well as activities involving crypto-assets and distributed ledger or "blockchain" technology.

The primary objective of this program is to cultivate the advantages of financial innovation while identifying and suitably managing risks to guarantee the stability and integrity of the banking system, the Federal Reserve announced.

Program Integration

The program will be assimilated into the Federal Reserve's existing supervisory processes. Experts from the program will work in conjunction with current supervisory teams to monitor banks engaged in these activities.

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Guidance On Stablecoin Activity

Additionally, the board provided guidelines on the procedure for a state bank supervised by the Federal Reserve to adhere to before engaging in specific dollar token or stablecoin activities. This includes proving to Federal Reserve supervisors that the bank has adequate safeguards to conduct the activity securely and soundly.

Continued Efforts For Clarity

These announcements are a continuation of the Federal Reserve's ongoing efforts to foster transparency as financial services and related technologies evolve. It builds on the board's policy statement from January, which clarified limitations on certain activities, promoting an even playing field for banks with a federal supervisor.

U.S. Banking Sector Shaken

In related news, the U.S. banking sector experienced a jolt as Moody's downgraded the ratings of 10 U.S. small and mid-sized banks late Monday. The downgrades, which include banks like M&T Bank Corp. MTB and Webster Financial Corporation WBS, come amid concerns over rising financing costs, potential weaknesses in regulatory capital and increasing risks associated with commercial real estate lending.

The action by Moody's sent shockwaves across the sector, leading to drops in shares of U.S. banks during Tuesday's trading session.

Related ETFs: Financial Select Sector SPDR Fund XLF and iShares U.S. Financials ETF IYF

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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