The Federal Reserve (Fed) announced it will shut down its program with additional scrutiny over crypto and fintech activities.
The program targeted activities that regulators deemed novel and potentially risky to financial stability.
The Fed stated:
“Since the Board started its program to supervise certain crypto and fintech activities in banks, the Board has strengthened its understanding of those activities, related risks, and bank risk management practices.”
The regulator will integrate knowledge gained from the program into standard supervisory processes while rescinding the 2023 supervisory letter that created the initiative.
The program’s dissolution follows several pro-cryptocurrency moves by federal regulators this year.
The Fed’s move positions the central bank alongside the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, which made similar changes this year.
The coordinated revisions eliminate a subjective standard that experts said allowed examiners to block banking services to crypto firms and prevented banks from offering basic crypto-related services.
The guidance describes safekeeping as holding digital assets on clients’ behalf while stressing that it does not create new supervisory demands.
Regulators instructed boards and executives to view crypto custody as a service that relies on exclusive control of private keys and other sensitive data, requiring banks to prove no other party can unilaterally move assets once they enter custody.
Powell acknowledged that regulators adopted a conservative stance after the 2022 market failures but indicated that some guidance may be relaxed to accommodate responsible innovation.
The program’s end represents a broader normalization of crypto banking supervision as regulators gain confidence in their understanding of digital asset risks and develop clearer frameworks for institutional participation in crypto markets.
