In an attempt to reduce the risks of banking activities while serving the cryptocurrency industry, the Federal Reserve has introduced a new program to supervise banks.
The Fed will monitor the movement of crypto assets and banks' interactions with digital assets, Bloomberg reported.
With the introduction of this program, U.S. regulators are taking another step to rein in the crypto industry.
The Fed's efforts are aimed at establishing oversight of banks' activities related to digital assets as well as the expanding range of crypto services offered by lending institutions. Recently, regulators including the SEC, the FOMC, and the Fed have issued several warnings about the potential risks associated with cryptocurrencies.
Bank services to crypto exchanges and cryptocurrency trading companies are a major concern for the Fed. Its banking supervision program is designed to harness the benefits of financial innovation for prudent risk management and banking system stability.
The instability of the cryptocurrency market is a concern for the Fed and the Federal Deposit Insurance Corporation, so reducing unchecked risk in the banking sector is a priority for regulators.
It is worth noting that the new controls have met with opposition from crypto market participants, who consider such policies unfavorable to digital assets.
"The Fed's fear is that banks working with such volatile assets will jeopardize the traditional banking sector," Howard Fisher of the Moses Singer law firm explained. According to him, until activities in the crypto sector are regulated similarly to traditional financial institutions, the fears are unlikely to dissipate.
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