The chairman of the Federal Reserve Jerome Powell again confirmed that the Central Bank does not object to US banks that provide services to cryptocurrency companies or participate in crypto-related activities, as long as they follow the established standards for risk management and consumer protection.
Powell made the statement during his half -yearly monetary policy report testimony for the House Financial Services Committee on 24 June, which strengthens recent steps of federal supervisors to strengthen barriers that have long limited the access from crypto to traditional banking.
On 23 June, the Federal Reserve Board formally removed the “reputation risk” from its banking supervisory framework, whereby examiners are tasked to get the subjective standard from exam manuals and instead to focus on measurable financial expenses.
The FED decides the decision with the Federal Deposit Insurance Corporation and the office of the Currency Comptroller, which made similar revisions earlier this year. Together, the three supervisors supervise each federal insured custody institution in the United States.
The coordinated policy shift eliminates a broad and often opaque reason that examiners have refused the bank services to crypto companies or prevent banks from offering services such as Bitcoin trade or custody.
Under the updated guidelines, FED staff are retrained to implement the changes uniform in all guided institutions and they will coordinate with Peer agencies to guarantee consistent supervision.
Powell laid the foundation for this approach earlier in April when he called on the congress to determine clear Stablecoin rules and promised that the FED did not intend to disturb itself with legal relationships between banks and cryptomabins.
Since then he has noticed that while supervisors have taken a cautious attitude after the unrest in the 2022 cryptomarkt, some guidance can now be relaxed to support “responsible innovation”, as long as banks retain strong riskelectricolies.
Participants in the industry have welcomed the removal of the reputation risk and the clear position of the FED as a milestone for integrating digital assets into the regulated financial system. Banks are expected to expand the offer from basic accounts to crypto custody, payments and settlement services.
Despite this openness of the regulations, Powell also told the legislators that the FED still expects to lower interest rates later this year, although internal predictions suggest that inflation can continue to be increased, a prospect that some economists say that the markets can be confused and the broader policy statue can cloud.
Regulators have not given a timeline for further guidance, but have emphasized that legal, liquidity and credit risk standards remain firmly in place because banks scale up crypto-related activities.