The Fed adds a new layer of bureaucracy for US banks engaged in crypto-asset business

The U.S. Federal Reserve Board has issued new guidance for banks engaged in crypto-asset activities that include executing their plans in front of their Fed supervisor.

The United States Federal Reserve Board sent a letter on Tuesday to its supervisory officers, staff, and the banks they supervise regarding activities with crypto assets. The letter covers the preliminary steps a bank must take before engaging in any activities with crypto and asks banks to inform the board of directors before pursuing such activities.

The letter, signed by the directors of the Regulatory and Community Affairs divisions, applies to all Fed-supervised banks with no minimum asset threshold. It begins with a warning about the risks associated with crypto, specifically mentioning the evolution of technology and its governance, the fight against money laundering, and the transparency and stability of assets such as the stablecoin.

The Fed monitors the activities of banks, the letter notes:

"Given the heightened and new risks posed by crypto-assets, the Federal Reserve is closely monitoring related developments and the involvement of banking organizations in crypto-asset-related activities."

He then reminded banks that they need to adequately prepare for risk management for activities with crypto assets. He also recommended checking state and federal laws on the legality of their projects and required deposits, including the Bank Holding Company Act, Home Owners' Loan Act, Federal Reserve Act, and Federal Deposit Insurance Act.

Related: Portuguese Banks Shut Down Crypto Accounts Over Risk Management Issues

The real call to action of the letter was the instruction that banks should notify their Fed oversight contacts in advance of their planned activities with crypto. Banks that are already engaged in such activities should provide prompt post-notification so that they can receive feedback.

An accompanying statement