The U.S. Federal Reserve (Fed) has announced the end of a special oversight program for banks' cryptocurrency and fintech activities, reintegrating this work back into standard supervisory processes.
Supervision of Novel Activities
The Fed launched the novel activities supervision program in August 2023 to oversee banks that provide deposit, payment, and lending services to crypto-related companies and fintechs. The Fed indicated that the program was focused on understanding associated risks and risk management practices in banks. "Since the Board started its program to supervise certain crypto and fintech activities in banks, the Board has strengthened its understanding of those activities and related risks," the Fed stated.
Political Aspects of Cryptocurrency Oversight
This decision does not necessarily indicate a retreat from oversight; however, it coincides with a softer stance from the Trump administration regarding digital assets. Since January 2024, the Securities and Exchange Commission (SEC) has dropped several investigations into crypto firms, and Treasury officials have aligned with White House plans for a national cryptocurrency reserve.
Regulatory Changes in Banking Operations with Cryptocurrency
The Fed also rescinded guidance that discouraged banks from engaging with cryptocurrencies and stablecoins. The 2022 supervisory letter requiring banks to pre-notify regulators about crypto-related activities and separate 2023 guidance on stablecoin services were withdrawn. Moving forward, banks' crypto activities will be monitored through the standard supervisory process, rather than through additional reporting.
In summary, the U.S. Federal Reserve is returning oversight of banking cryptocurrency services to standard processes, reflecting potential shifts in regulatory policy towards digital assets.
