Internet Law Commentary

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Federal Reserve: What Community Banks Should Know About Virtual Currency

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The Federal Reserve System issues periodic newsletters to highlight information that community banks may find helpful in order to comply with Federal Reserve policy.

To that end, the Federal Reserve’s “Community Banking Connections” is supposed to be a “primary source for information on guidance, resources, and tools to help community banks across the United States.”

With that in mind, bitcoin and virtual currency enthusiasts might be interested in the article, “What Community Bankers Should Know About Virtual Currencies,” here.

The article discusses how bitcoin exchanges are on the rise and that they may need traditional banking services which could pose risks to community banks.  Optimistically, the article suggests that “opportunities abound for community banks to provide services to entities engaged in virtual currency activities” and that banks “may find themselves holding virtual currency on their own balance sheets.”  That said, the article focuses on compliance, reputational, credit, and operational risks.  It ends on a high note: “Virtual currencies bring with them both opportunities and challenges, and they are likely here to stay.”

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