The U.S. Federal Reserve Board released more information this week on its program to supervise novel activities in the banks it oversees.
Novel activities are those that involve complex, technology-driven partnerships with non-banks to provide banking services to customers. They also include activities that involve crypto-assets and distributed ledger or “blockchain” technology.
The goal of this novel activities supervision program is to foster the benefits of financial innovation while addressing the potential risks to ensure the safety and soundness of the banking system. The program will be integrated into the Federal Reserve’s existing supervisory processes, with experts working alongside current supervisory teams to oversee banks engaged in novel activities.
In addition, the board provided additional information on the process for a state bank supervised by the Federal Reserve to follow before engaging in certain dollar token or stablecoin activity. The process includes demonstrating to Federal Reserve supervisors that the bank has the appropriate safeguards to conduct the activity safely and soundly.
These initiatives are part of the Federal Reserve’s work to provide more clarity for all parties as financial services and related technologies continue to evolve. Further, these announcements build on the board’s policy statement, released in January, which seeks to bring clarity on limitations on certain activities while promoting a level playing field for banks with a federal supervisor.