The Federal Reserve System’s (FRB) Board of Governors has introduced guidance addressing innovative banking activities, including bank-fintech partnerships and digital assets, while also strengthening regulations surrounding stablecoin operations.
The FRB released guidance on August 8, 2023, outlining its approach to supervising novel activities. It introduced the “Novel Activities Supervision Program” to monitor and examine innovative activities, particularly complex technology-driven partnerships with non-banks for banking services and digital asset-related operations. The program will be risk-based, involving a multidisciplinary group and will apply to banks supervised by the FRB, including those with $10 billion or less in consolidated assets.
Additionally, the FRB introduced a process for state member banks to engage in certain stablecoin activities. This process builds on previous issuances and emphasizes risk management practices related to operational, cybersecurity, liquidity, illicit finance, and consumer compliance risks. State member banks must obtain supervisory nonobjection before engaging in stablecoin activities, with ongoing heightened monitoring expected.
These developments underscore the FRB’s cautious approach to fintech and digital asset activities, and demonstrate the need for comprehensive legislative frameworks in the US financial markets to facilitate innovation.
By FCCT Editorial Team
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