Federal Reserve Ends Banking Crypto Supervision Program
- The Federal Reserve terminates its crypto regulatory program.
- Banks face lower barriers for cryptocurrency activities.
- Crypto assets like BTC, ETH impacted by oversight changes.
The Federal Reserve officially terminated the Novel Activities Supervision Program, which targeted banks’ cryptocurrency business, shifting oversight to routine processes, impacting digital asset engagement regulations.
The decision reduces regulatory barriers, potentially expanding U.S. banks’ roles in digital assets, affecting cryptocurrencies like BTC, ETH, and stablecoins, amid continued adherence to risk management frameworks.
The Federal Reserve has officially ended its Novel Activities Supervision Program, affecting banks’ cryptocurrency activities. Previously, banks were required to notify the agency before engaging in related activities. Now, these will be under routine banking supervision.
This change, implemented by the Federal Reserve Board in collaboration with the FDIC and OCC, reflects reduced oversight. Led by Michael Barr, Vice Chair for Supervision, the guidance withdrawal signifies a notable regulatory shift in the crypto space.
The announcement may lower regulatory barriers for U.S. banks handling crypto-assets. Industry participants anticipate the easing will allow banks to engage more freely with digital asset markets, possibly spurring further adoption and innovation.
Financial institutions engaged in crypto-related custody and payment services might see increased activity. The move is expected to lead to an uptick in institutional investment into mainstream digital currencies, such as BTC and ETH.
Regulatory changes often precede brief market upticks. However, any positive trends typically stabilize as routine oversight resumes. Observers will watch for increased bank service offerings in custodial tokens and stablecoins tied to regulated markets.
Historical precedents show similar regulatory relaxations lead to short-term market optimism. While immediate shifts in Total Value Locked (TVL) are not reported, such policy changes present potential increases in institutional flows. However, compliance standards remain paramount.
“The Board is rescinding its 2022 supervisory letter establishing an expectation that state member banks provide advance notification of planned or current crypto-asset activities. As a result, the Board will no longer expect banks to provide notification and will instead monitor banks’ crypto-asset activities through the normal supervisory process.”
— Federal Reserve Board, Official Statement
