The US Federal Reserve (FED) issued a new directive on Monday, which also includes cryptocurrencies. The guide specifically outlines factors that reserve banks will consider when examining requests for Fed accounts and payment services. The guidelines establish a three-stage review framework with the level of due diligence to be provided based on the applicant’s level of risk. Here are the details…
FED announces directive for cryptocurrency companies
Monday’s announcement will apparently bring the US central bank one step closer to allowing Wyoming special-purpose custodians (SPDI) like Custodia (formerly Avanti) and Kraken Bank to access these accounts so they don’t need intermediary banks. The Fed offered to issue guidance for the first time last year by initiating a request for comment process. About 300 participants commented. This led to a second public feedback process earlier in the year.
It is broadly similar to the guideline first proposed in 2021. However, the framework was refined “to ensure equity between state and non-federally insured agencies authorized under federal law.” Non-federally insured entities that do not have a holding company subject to Fed oversight that are chartered under federal law will be subject to the most stringent scrutiny. Financial institutions need a Fed account to access global payment systems.
The guidance will allow the Fed to tailor the evaluation process for access grants based on what type of financial institution is applying. Thus, it will create a multi-layered system. Each layer, in turn, will correspond to a more stringent review process. The following statements were made in the statement made by the FED:
Institutions that engage in new activities and where authorities are still developing appropriate supervisory and regulatory frameworks will undergo a more thorough review.
What had happened before in platforms’ quest for regulation?
Both Custodia and Kraken applied for main account access in 2021, shortly before the Fed published its first proposal. Kraken Bank CEO David Knitsky said at the time that the offer was a positive step for his company. “There is nothing new in terms of the factors they include here. “In terms of risk to the reserve itself, risk to the payment system [and] risk to the economy, that’s exactly what the Federal Reserve is looking at.” Both companies received routing numbers earlier this year, an important step in gaining access to main accounts. He says this is not an indication that companies will definitely get access. Still, Custodia sued the Fed in June for allegedly violating the mandatory one-year deadline in deciding whether to grant the Wyoming firm access.
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