The Federal Reserve announced today that it is ending a program created in 2023 for supervising banks involved in cryptocurrency and new financial technologies. The program is shifting back to the standard oversight process.
Reasons for the Program's Creation
The initiative was introduced in the context of rapid advancements in financial technology, as regulators sought to keep up with emerging challenges in the market. The Fed noted that these 'novel' activities may raise legal questions and create risks not fully covered by existing oversight.
Political Changes and Program Closure
The decision to end the program follows President Donald Trump's signing of an executive order aimed at curbing 'unfair banking practices'. This was directed at guidance and programs that critics claimed were used to cut off financial services to crypto companies.
Market Participants' Opinions
Senator Cynthia Lummis commented on social media platform X, stating that the end of the program is a significant win against 'Operation Chokepoint 2.0'. She noted, 'The Fed announced it's killing the targeted supervision of digital asset banking activities.' The Fed also expressed confidence in managing crypto and fintech activities through its usual regulatory channels.
The closure of the special oversight program for banks working with crypto assets marks a significant step in the relationship between regulators and rapidly evolving financial technology. This decision reflects a deeper understanding of the risks and characteristics of these new financial products.
