State-owned banks that are members of the Federal Reserve System should obtain a written regulatory no objection from the Fed before issuing, holding or trading U.S. dollar tokens (such as stablecoins) used to facilitate payments, the Fed said in a new regulatory letter on Tuesday. .

The Fed also stated that it is developing a new supervisory program to oversee the activities of the banks it supervises in relation to cryptocurrencies, blockchain technology and technology-driven non-bank partnerships, designed to complement its existing supervisory process, And strengthen technology-driven regulation. Activity.

This comes just a day after payments giant PayPal announced it would launch its own stablecoin, a cryptocurrency typically pegged to traditional assets. Dollar.

Previous attempts by major mainstream companies to launch stablecoins have faced strong opposition from financial regulators and policymakers. Meta (then Facebook) plans to launch the stablecoin Libra in 2019 were thwarted by regulators’ concerns that it could destabilize global financial stability.

In order for banks to obtain written no-objection opinions and be able to participate in stablecoins, banks should demonstrate appropriate risk management, including having systems in place to identify and monitor any potential risks, including cybersecurity and illicit financial threats, the Fed said.

National member banks that engage in activities related to U.S. dollar tokens will continue to be subject to regulatory scrutiny and enhanced monitoring of those activities upon receipt of written no-objection comments, the Fed said.

© Thomson Reuters 2023

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