The United States Federal Reserve is planning to address ambiguities that they feel are plaguing digital asset regulation in the country following rapid analyses by government agencies.
In a Nov. 23 announcement, the Board of Governors of the Federal Reserve System said it recently worked with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency on a series of “policy sprints” aimed at addressing regulatory clarity in the crypto space. The interagency effort included building a greater understanding of the terminology surrounding crypto assets, identifying potential risks, and analyzing existing regulatory frameworks to determine if any changes were necessary.
According to the Fed, the three agencies plan to address whether “certain crypto-related activities conducted by banking organizations are legally permissible” in addition to potentially adjusting compliance and enforcement standards on existing laws and regulations related to custody services, the buying and selling of cryptocurrencies, loans collateralized by crypto, HODLing, and the issuance of stablecoins in 2022. The trio also intend to consult with the Basel Committee on Banking Supervision, a global committee of banking supervisors and central banks, which provides recommendations for banks considering holding crypto.
“The emerging crypto-asset sector presents potential opportunities and risks to banking organizations, their customers, and the overall financial system,” said the Fed. “The interagency sprints quickly advanced and built on agencies' combined knowledge, which helped identify and assess key issues related to potential crypto-asset activities conducted by banking organizations.”
The announcement follows a Nov. 1 report from the President’s Working Group on Financial Markets suggesting that legislation is “urgently needed” to address the potential financial risks of stablecoins. At present, a seeming legislative tug-of-war is occurring between U.S. government agencies in regulating the crypto space, with much of the force behind the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Related: Fed still undecided about digital dollar, says Chair Jerome Powell
Roughly half of the seats for the Fed’s Board of Governors could be filled with fresh blood starting in 2022 following the expected departure of Richard Clarida. On Monday, President Joe Biden announced he would be nominating Jerome Powell for a second term as Fed chair, with the potential to last until 2026.
However, as Powell is an existing board member, there will likely still be three empty seats for the U.S. President to fill during his first term. On Monday, the White House said Biden aimed to announce his picks for those positions as well as for the Fed’s vice chair for supervision in early December with a focus on “improving the diversity in the Board’s composition.”
The Senate Banking Committee announced on Tuesday that Powell would be testifying alongside Treasury Secretary Janet Yellen in a Nov. 30 hearing to address oversight of the Fed and Treasury in the Coronavirus Aid, Relief, and Economic Security Act. However, to be confirmed as the next Fed chair, Powell will still need to attend a hearing in front of the same committee before the Senate can vote on his nomination.