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Federal Reserve Launches Novel Activities Supervision Program Targeting Digital Assets and Non-Bank Partnerships via Banks

Regulation | Aug 15, 2023

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The Novel Activities Supervision Program is the Federal Reserve's latest initiative, signaling a transformative approach to banking oversight.

The Federal Reserve has launched the Novel Activities Supervision Program, targeting banking institutions to address the evolving challenges of modern finance. While financial innovations backed by new tech can benefit the U.S. economy and its consumers, they can also introduce new risks that might affect the stability and integrity of banking institutions.

The letter applies to all banking organizations supervised by the Federal Reserve, including those with $10 billion or less in consolidated assets to enhance the oversight of innovative activities undertaken by banking organizations under its supervision.  The program will work in tandem with existing Federal Reserve supervisory teams. It will be risk-based, and the intensity of supervision will differ based on the level of engagement in innovative activities by each supervised banking organization.

See:  The Federal Reserve Issues State Member Bank Guidance for ‘Dollar Tokens’ (Dollar-pegged Stablecoins)

Who's caught in scope?

  • Partnerships with Non-Banks. Collaborations where a non-bank offers banking products and services to end-users, typically using technologies like application programming interfaces (APIs).
  • Crypto-Asset Activities. This includes crypto-asset custody, crypto-backed lending, facilitating crypto trading, and involvement in stablecoin/dollar token issuance.
  • DLT Projects. Exploration or utilization of DLT for various applications such as dollar token issuance and asset tokenization.
  • Services to Crypto Entities and Fintechs. Banking organizations that primarily offer traditional banking services like deposits, payments, and lending to crypto-related entities and fintechs.

View the letter --> here


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