Ripple’s CTO Weighs In On The Federal Reserve Warning Banks That Do Business With PayPal’s Stablecoin

By Anthony • August 13, 2023 3:26 am • Comments

CTO of Ripple David Schwartz weighed in on the Federal Reserve’s recent decision to warn banks about using PayPal’s new stablecoin.

Schwartz tweeted “A challenger appears!” in response to the news that the Federal Reserve just issued another warning to any bank that has anything to do with the new PayPal stablecoins.

The Federal Reserve’s new warning stated, “To acquire a written notification of supervisory nonobjection, a state member financial institution ought to display that it has established applicable danger administration practices for the proposed actions, together with having satisfactory programs in place to establish, measure, monitor, and management the dangers of its actions, and the flexibility to take action on an ongoing foundation.”

Trending: Federal Reserve Chairman Jerome Powell Say Federal Reserve Cannot Own Bitcoin

Take a look at Schwartz’s tweet here:

Per Crypto News BTC:
David Schwartz appears unsurprised that the Fed is reacting negatively to the brand new stablecoin issued by PayPal.Ripple’s chief expertise officer (CTO) David Schwartz has commented on the elevated regulatory necessities imposed by the US Fed for the nation’s cryptocurrency surroundings.

Schwartz tweeted a shady comment, referring to PayPal’s newly launched stablecoin (PYUSD) and whether or not or not the corporate had the mandatory approvals. In a current tweet, John Reed Stark Consulting President gave some perception into a brand new announcement from the Federal Reserve.

The apex financial institution and regulator has now mandated that each one state banks underneath the Federal Reserve system should obtain a written supervisory nonobjection from the regulator earlier than coping with stablecoins. This covers all transactions, together with holding, issuing, or in any other case transacting with stablecoins.The announcement additionally explains the Fed’s expectation from the method of acquiring the nonobjection. It says:“To acquire a written notification of supervisory nonobjection, a state member financial institution ought to display that it has established applicable danger administration practices for the proposed actions, together with having satisfactory programs in place to establish, measure, monitor, and management the dangers of its actions, and the flexibility to take action on an ongoing foundation.”

Per Bitcoinest:
In a letter dated August 8, the Federal Reserve further stipulated guidelines for state member banks that may be looking to issue, offer, and trade dollar-backed stablecoins. Recall that the Fed had initially, in a press release, provided that supervised-state banks had to demonstrate to the Federal Reserve supervisors that it had put “appropriate safeguards” in place to conduct stablecoin-related transactions safely and soundly.

According to the Fed, these banks must first receive “written notification of supervisory nonobjection” from the agency before they can proceed to transact with dollar-backed stablecoins. Even after receiving this notification, such banks will be subject to “supervisory review and heightened monitoring of these activities.”The agency further went on to state the risks(associated with trading stablecoins) that these “appropriate safeguards” are meant to cover. Such risks include operational risks, illicit finance risks, consumer compliance risks, liquidity risks, and cybersecurity risks. How This Could Hinder PYUSD UtilityWhile this may simply be the Fed doing its job, these guidelines could undoubtedly cause unease among banks that may have been looking to accept Paypal’s PYUSD or any other stablecoin for that matter. Furthermore, what constitutes “appropriate safeguards” is subjective (and only known to the agency), and without the Fed’s approval, these banks cannot transact these dollar tokens.

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