Crypto And Blockchain Can Create A Problem For Banks, Here's What The Fed Atlanta Says!

Atlanta Federal Reserve Bank. (Photo; Doc. Looking Alpha)

JAKARTA The Federal Reserve Bank of Atlanta or the Federal Reserve Atlanta Bank issued a warning to other banks about the risks posed by crypto and blockchain. This statement was issued on Monday, amid rising allegations of crypto use for illegal activities. Atlanta Fed also advises banks to follow the complete Federal Reserve guidelines on how to operate with crypto transactions.

Crypto And Blockchain Change Banking Industry

Crypto and blockchain are new technologies that are changing the banking industry. Banks must adapt to this development to remain competitive and secure. Atlanta Fed states that banking regulators must ensure the stability and security of credit and bank cooperatives. Banks may have several partnerships with payment service providers, fintech, or other technology companies. Each of these partnerships carries risks if not managed properly.

The Atlanta Fed also informs about the Supervision Program for New Novel Activities from the Federal Reserve, which aims to identify and manage risks associated with four activities. These four activities include complex technology partnerships, crypto asset-related activities, Distributed Ledger Technology (DLT) such as blockchain, and banks focused on serving crypto entities and fintech.

The report also emphasizes that banks must follow applicable laws and regulations in establishing partnerships with other parties. The Federal Reserve does not take a position about who can get banking services, as long as they are within legal limits. Banks are not prohibited or hindered from serving clients of certain classes or types, according to what is permitted by law or regulations.

Federal Reserve Opens To CBDC

The Federal Reserve does not completely reject crypto. The central bank has expressed interest in the Central Bank Digital Currecies (CBDC), which is digital money issued and guaranteed by the central bank. The Federal Reserve is also actively talking about the need to regulate the digital currency market.

The Federal Reserve has released a letter entitled Money and Payments: The US Dollar in the Age of Digital Transformation. This letter is the first step to promote open and inclusive public discussions about CBDC. The Federal Reserve has yet to decide whether to issue a CBDC. This will only be done if there is a law that allows it. In March 2023, Powell stated in his testimony before the House of Representatives' Financial Services Committee that CBDC is something we certainly need.

The Government Is Worried About Bitcoin

According to Investopedia, the emergence of cryptocurrencies is praised by its supporters as the beginning of a new monetary order. On the other hand, critics refer to Bitcoin as quadratic rat poison' for its involvement in illegal activities and lack of official legal status.

Governments around the world are monitoring the development of Bitcoin and acting in accordance with their interests. Some have accepted Bitcoin as legal tender, such as El Salvador. Some have even banned Bitcoin directly, treated it as property or commodity, or even refused to admit it. A similar example is the European Union setting a framework for crypto regulation in 2023.