Crypto Regulation: Fed Announces Roadmap for 2022 — What It Means for Investors and Developers

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Federal bank regulatory agencies — including the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency — issued a statement on Nov. 23 which summarized their interagency “policy sprints” focused on crypto-assets, as well as provided a roadmap of future work related to crypto-assets.

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The agencies said that as supervised institutions participate in crypto-asset-related activities, it is important that they “provide coordinated and timely clarity where appropriate to promote safety and soundness, consumer protection, and compliance with applicable laws and regulations, including anti-money laundering and illicit finance statutes and rules,” according to the announcement. To that end, the agencies recently conducted a series of interagency “policy sprints” focused on crypto-assets.

The focus of the work was around building understandable crypto terminology, identifying key risks related to crypto-asset activities and analysis of current regulations in regard to how they can be further clarified. To place the sprint work in context, they reviewed several crypto-asset activities in which banking organizations may be interested in engaging. These activities include crypto-asset custody; facilitation of customer purchases and sales of crypto-assets; loans collateralized by crypto-assets; and activities involving payments, including stablecoins.

Yoda Regev, CEO at Atom Foundation, SmartSwap.Exchange & CBDSC, told GOBankingRates that the Fed’s intention to regulate and control stablecoins is clear, “which means now more than ever, there needs to be an alternative for governments and central banks that want to maintain a particular monetary policy on top of their central bank digital currency (CBDC).” He went on to say that, “current solutions in the market are not able to provide this flexibility to the Federal Reserve.”

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“All countries are exposed to inflation and deflation,” Regev continued. “Some countries allow the market to lead while other countries prefer to apply their own policy.”

The agencies said they have developed a crypto-asset roadmap for 2022, which plans to provide greater clarity on whether banking organizations’ crypto-assets-related activities are legally permissible, and expectations for safety and soundness, consumer protection, and compliance regarding existing rules and regulations. Areas of focus will will include crypto-asset safekeeping and traditional custody services, custody services, facilitation of customer purchases and sales of crypto-assets, loans collateralized by crypto-assets, issuance and distribution of stablecoins, and activities involving the holding of crypto-assets on balance sheet. They added that they will also evaluate the application of bank capital and liquidity standards to crypto assets for activities involving U.S. banking organizations.

Kyle White, COO Atom Foundation, SmartSwap.Exchange & CBDSC, added that any CBDC built based on the current stablecoin concept is going to struggle against the Fed’s smell test since it is a continuance of current methods. “The Federal Reserve’s clarification should be a wake up call for developers to build products that add value to the Fed’s goals and aims,” White told GOBankingRates.

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“For example, it is reasonable to assume that with the acceptance of digital currencies, the conversion rate and the trading volume between digital assets may increase, as well, White added. “This gives the public easy access for such trading and they may panic during catastrophic events (or a bear market) and pay over price to avoid losses and move into a stable currency, or the other way around when attempting investment opportunities such as bitcoin are available during a bull market. Such volatility may be disruptive to monetary policy.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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