Fed requires banks to obtain approvals for stablecoin operations

The U.S. Federal Reserve System (the Fed) has stepped up supervision of state-controlled banks involved in cryptocurrency and stablecoin operations.

According to the statement, before issuing, holding, or transacting with dollar-pegged tokens, financial institutions must obtain written permission from the agency.

Banks must also have risk management practices for cybersecurity, liquidity, consumer protection requirements, and the fight against illicit financing.

Additionally, the Fed will regulate the provision of banking infrastructure to firms engaged in digital assets and blockchain technology. Supervisory groups will be able, at their discretion, to examine financial institutions for compliance with U.S. law.

In this way, the central bank aims to ensure the safety and soundness of the banking system.

In June, Federal Reserve Chair Jerome Powell described stablecoins as money and called for regulation.

Earlier, the House Financial Services Committee introduced the third version of a focused bill on stablecoins.

In February, the Fed, FDIC and OCC reminded U.S. financial institutions of potential risks, arising from crypto-service providers.