Many financial firms want to get involved in crypto assets, but the US Federal Reserve is calling for caution. The Fed warned on Tuesday that the newly emerging business area offers opportunities, but may also pose risks to consumer protection and financial market stability. It is imperative that banks check in advance that crypto transactions are legal and give financial regulators advance notice of their plans.
Cryptocurrencies such as bitcoin or ether have increasingly developed from a niche phenomenon into a fixture in the financial market in recent years. Banks also want to make money from the digital speculation frenzy. But prices fluctuate wildly, as the recent crash showed once again. Small investors continue to suffer heavy losses. Regulators like the Fed are therefore under pressure to close regulatory gaps in the crypto market.
The US Federal Reserve has therefore now issued guidelines for banks on how to handle cryptocurrencies. Accordingly, all credit institutions planning a digital money business must inform the central bank in advance. It is also the bank’s job to ensure that planned transactions are legally compliant, the Fed announced on Tuesday.
Fed calls for risk management to protect consumers
Of particular importance is the availability of risk management systems that ensure that the volatile assets do not violate consumer protection. The move comes just days after several Democratic senators urged the OCC to change its existing guidelines for cryptocurrencies.
Last year, US banking regulators, including the Fed, said they would clarify by 2022 whether banks are allowed to hold digital assets on their balance sheets and facilitate crypto trading on behalf of customers.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
