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Monday, October 3, 2022
HomeCryptoFederal Reserve Board points letter concerning crypto-asset-related actions

Federal Reserve Board points letter concerning crypto-asset-related actions

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Opalesque Industry Update – On Aug. 16, 2022, the Board of Governors of the Federal Reserve System (FRB) issued a letter concerning FRB-supervised banking organizations (Covered Entities) participating in crypto-asset-related actions (C-A-R actions).

While the Letter acknowledged that the crypto-asset sector might probably current useful alternatives for Covered Entities, the Letter cautioned that C-A-R actions might additionally pose dangers, particularly regarding shopper safety, security and soundness, and monetary stability.

The Letter elucidated a number of requirements-as properly as suggestions-applicable to Covered Entities concerning C-A-R actions, together with the next:

• A Covered Entity should ensure-prior to conducting new activities-that such new actions are legally permissible.

• A Covered Entity looking for to have interaction in-or presently engaged in-C-A-R actions should analyze whether or not such actions could be permissible below related state and federal legal guidelines. In addition, the Covered Entity should consider whether or not any filings are required per federal banking legal guidelines (together with g., the Home Owners’ Loan Act, the Bank Holding Company Act, the Federal Deposit Insurance Act, or the Federal Reserve Act) or corresponding promulgated laws, as relevant.

• Prior to participating in any C-A-R exercise, a Covered Entity ought to notify its lead supervisory level of contact on the FRB.

• If a Covered Entity is already engaged in C-A-R actions, then that Covered Entity ought to promptly notify its lead supervisory level of contact on the FRB, assuming the Covered Entity has not already carried out so.

• Covered Entities with questions concerning the permissibility of any C-A-R actions or the applicability of any submitting necessities ought to seek the advice of their lead supervisory level of contact on the FRB.

• In all circumstances, previous to participating in C-A-R actions, a Covered Entity ought to be certain that it maintains acceptable threat administration, methods and controls to conduct C-A-R actions “in a safe and sound manner and consistent with applicable laws, including applicable consumer protection statutes and regulations.” The Letter additional states that such methods ought to cowl monetary threat, authorized threat, operational threat (g., dangers posed by new and evolving applied sciences, hacking dangers, third-party dangers), compliance threat (together with e.g., anti-money laundering and sanctions dangers) and “any other risk necessary to ensure the activities are conducted in a manner that is consistent with safe and sound banking and in compliance with applicable laws, including applicable consumer protection statutes and regulations.”

• Prior to participating in C-A-R exercise, a Covered Entity which is a state member financial institution also needs to notify its state regulator.

The Letter famous that, given the novel and heightened dangers that crypto-assets pose, the FRB will proceed to intently monitor developments within the crypto-asset sector and participation by Covered Entities in C-A-R actions.

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