The U.S. Federal Reserve says its state member banks need to ask for permission before interacting with stablecoins.
The Fed published a regulation letter on Wednesday outlining its new rules on “tokens denominated in national currencies and issued using distributed ledger technology,” otherwise known as stablecoins.
“A state member bank seeking to engage in activities permitted for national banks under OCC (Office of the Comptroller of the Currency) Interpretive Letter 1174, including issuing, holding, or transacting in dollar tokens to facilitate payments, is required to demonstrate, to the satisfaction of Federal Reserve supervisors, that the bank has controls in place to conduct the activity in a safe and sound manner.
To verify this requirement has been met, a state member bank should receive a written notification of supervisory nonobjection from the Federal Reserve before engaging in the proposed activities.”
The regulation letter also notes that even state member banks that just want to test stablecoins should reach out to the Fed before doing so.
To receive “supervisory nonobjection” to interact with stablecoins, banks will need to demonstrate they’ve established “appropriate risk management practices” to address operational, cybersecurity, liquidity, illicit finance and consumer compliance risks.
More than one-third of the commercial banks in the US are Fed members, according to the Federal Reserve Bank of Richmond.
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