Simply put
- The Federal Reserve has concluded its oversight program that monitored banks involved in cryptocurrency activities.
- US banks will now face less intensive scrutiny when offering services like crypto custody and Stablecoin management.
- This decision from the Fed arrives as the regulatory landscape in the US shifts, especially under Trump’s administration.
The Federal Reserve announced on Friday that it has discontinued its program aimed at supervising US banks engaged in providing crypto services.
In 2023, the central bank had required banks participating in crypto and fintech operations to notify the Fed and adhere to specific strict guidelines.
“Since we started this program, we’ve gained a better understanding of these activities and associated risks,” the Fed mentioned, while confirming the program’s termination.
“New” initiatives, such as offering Crypto Asset Custody or Stablecoin services, will now be managed through traditional oversight processes instead of under a specialized program with enhanced regulations, according to the Federal Reserve.
Friday’s update follows the Fed’s retraction earlier this year of two similar supervisory letters that had previously restricted US banks from engaging more broadly with crypto.
The Federal Reserve initially provided guidance to banks on crypto and distributed ledger technology back in August 2022 and reiterated it in August 2023. This aimed to foster risk minimization.
At that point, the Fed emphasized the need to manage “risks related to innovation” while keeping an eye on banks’ ambitions in areas like crypto custody.
This particular directive revolves around a new activity oversight initiative established by the Fed in August 2023, which was designed to monitor US banks for their participation in crypto services. This was in addition to an increase in oversight regarding their operations with traditional banking functions such as deposits and loans related to crypto assets.
Since the collapse of the FTX digital asset exchange and the downfall of various smaller, crypto-friendly banks in 2023, US regulators have grown cautious about the intersection of the crypto sector with the broader financial landscape.
Crypto industry leaders have long criticized US banking regulatory policies that have denied services to digital asset companies, believing there’s a concerted effort to stifle growth in the sector. They termed this alleged initiative “Operation Chalk Points 2.0,” borrowing the name from an earlier attempt to curb high-risk businesses.
However, President Trump’s administration has adopted a more favorable stance towards the digital asset market since his appointment in January. For example, the SEC has seen new leadership that has dropped several lawsuits against digital asset firms initiated during the Biden era.
Trump, who has a personal stake in various crypto ventures, has also made promises related to crypto through executive actions.
Editor’s Note: This story was updated to include additional details regarding the Federal Reserve’s oversight concerning cryptocurrencies.
