Home Business Crypto Banks now has guidelines for master accounts as published by the Federal Reserve

Crypto Banks now has guidelines for master accounts as published by the Federal Reserve

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Crypto Banks now has guidelines for master accounts as published by the Federal Reserve

Crypto banks and other fintech institutions now have levels of guidelines to follow when the Federal Reserve Board releases them.

The Federal Reserve (Fed) Board of Governors has issued new guidelines that will standardize requests for major accounts from organizations that have new charters.

These guidelines apply to cryptocurrency banks and other cryptocurrency business or industry groups.

Institutions can gain direct access to Federal Reserve payment systems by opening Reserve Bank Master Accounts. Without access to this information, companies are forced to form partnerships with other financial institutions that hold master accounts.

A number of US-based crypto custodial banks have, over the past few years, advocated for direct access to major banks.

With these guidelines in place, institutions can now have more independence in their operations as long as they implement the regulatory measures.

These crypto firms can now avoid working with conventional banks as intermediaries.

Crypto Banking Guidelines for Master Accounts

The guidelines establish a review framework consisting of three levels. However, the level of due diligence given to an institution will continue to vary depending on the risk level of the applicant.

In recent years, financial institutions related to crypto or similar types of financial products have increased significantly.

The Fed said that as the number grew, many of these institutions requested access to accounts and payment services provided by Federal Reserve banks. These accounts are often referred to as “main accounts”.

The established guidelines are said to be a set of risk-based, transparent, and consistent parameters for Reserve Banks to use in assessing requests for access to Federal Reserve accounts and payment services.

To further clarify the level of due diligence and scrutiny Reserve Banks would apply to different types of institutions with different levels of risk, the new rules contain a tiered review approach.

According to Federal Reserve“For example, institutions with federal deposit insurance would be subject to a more streamlined level of scrutiny, while institutions that engage in new activities and for which authorities are still developing oversight and appropriate regulations would be subject to further consideration.”

The guidelines recently published by the federal authorities are close to the guidelines proposed by the Council in its proposals of May 2021 and March 2022.

The step-by-step review approach included in the final guidelines has been improved in response to feedback from the general public.

This revision was made to provide a more equal level of treatment between non-federally insured institutions governed by state law and federal law.

Read also: Tiffany & Co Turns CryptoPunk NFTs Into Pendants, Going On Sale August 5 – How Much Will It Cost?

The future of crypto and fintech

However, while this is a win for innovation, the impending Web3 industry and the crypto industry, it seems not everyone is happy with the idea that custodian banks of crypto are allowed to access the main accounts.

According Crypto News“The Fed said that during the consultation period on its proposed guidelines, many commentators pointed to ‘fintech’ related business models and other new special purpose charters as heightened risk to the Fed. payment system and financial markets.

Michelle Bowman, Governor of the Federal Reserve System, noted that more work needs to be done before a mechanism can be formed to properly apply the principles.

Bowman also offered some caveats, saying that while the standards will improve consistency and transparency, they are only the first step toward a transparent application process.

On top of that, it gave the impression that the Federal Reserve and other reserve banks would not be rushing through the process of evaluating applications from the cryptocurrency industry.

Related article: Email Marketing Company Klaviyo Has Been Hacked; Stolen crypto-related mailing lists

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