The US Fed Board has released final guidelines that must be followed by Reserve Banks. Accordingly, banks will follow these guidelines when “reviewing requests for access to FED accounts and payment services”. According to the board, the final guidelines will take effect when published in the Federal Register. So what do these guidelines mean for Bitcoin, Ethereum, and other cryptocurrencies?
Fed issued new guidelines
The U.S. Federal Reserve Board recently released what it calls “final guidelines that establish a transparent, risk-based and consistent set of factors for Reserve Banks to use when reviewing requests for access to Fed accounts.” According to the Fed’s statement, the latest guidelines are similar to those from May 2021. It’s also nearly identical to the additional guidelines proposed in March this year. These new guidelines will take effect after they are published in the Federal Register.
The move has the potential to pave the way for fintech and Bitcoin banks and special-purpose depository institutions (SPDIs). Kraken applied for a main account with the Fed in October 2020. The Fed’s latest statement included a quote from vice president Lael Brainard explaining why the guidelines are needed. In the quote, Brainard said, “The new guidelines provide demands for Fed accounts to support a secure, inclusive and innovative payment system. It also enables a consistent and transparent process for evaluating access to payment services.”
What will be the impact on Bitcoin and altcoins?
It is possible that new Fed guidelines will pave the way for fintech and crypto banks. This could lead to greater adoption for Bitcoin and altcoins. At the same time, it could lead to the emergence of more inflows of funds into the cryptocurrency market. Both situations mean a positive impact for Bitcoin and altcoins. More inflows and adoption are one of the main drivers of cryptocurrency price growth. Therefore, the new guidelines have the potential to lead to an indirect price increase in cryptocurrencies.
Increasing demands for access to accounts
Increasing access requests for accounts are driven by the increasing number of institutions offering “new financial products”. The guidelines require that institutions with federal deposit insurance undergo “regular review,” according to the Fed. On the other hand, the FED adds a footnote for institutions that are judged to be engaged in new activities and that have not yet been created. That is, institutions that are not managed with an “appropriate supervisory and regulatory framework” require a comprehensive review.
In June, Custodia Bank (formerly Avanti) filed a lawsuit against the Federal Reserve Board of Directors. The lawsuit arose due to the “illegal delay” of the company’s main account application. Custodia applied for a FED main account in October 2020, similar to Kraken, as we reported on cryptokoin.com. However, 2 companies have been waiting for a response for 21 months since the application.
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