The Federal Reserve has rescinded its guidance requiring banks to inform them before engaging in cryptocurrency activities, allowing for more freedom in the sector. Michael Saylor lauded the move, stating banks can now support Bitcoin. This decision follows recent comments from Fed Chair Jerome Powell advocating for clearer regulations around cryptocurrencies, reflecting a broader trend of increasing institutional acceptance within the industry.
In a surprising move, the Federal Reserve announced on Thursday that it has withdrawn its prior guidance requiring banks to notify regulators before engaging in cryptocurrency-related activities. This change comes alongside the revocation of a supervisory letter from 2022, which aimed to enforce risk management practices and compliance controls among financial institutions dealing with digital assets.
The Fed’s decision indicates a shift in how it will monitor banks’ cryptocurrency dealings, opting to incorporate these activities into a more regular supervisory process rather than requiring pre-emptive notifications. Interestingly, this also includes a backing away from its 2023 supervisory letter related to dollar-backed stablecoins.
In response to the Fed’s new stance, Michael Saylor, the co-founder of Strategy MSTR, expressed enthusiasm, claiming that this shift allows banks greater freedom to support Bitcoin. His excitement highlights a significant affirmation for the crypto community as it looks for more institutional backing.
The Fed’s announcement coincides with Fed Chair Jerome Powell’s previous remarks suggesting possible easing of certain regulations surrounding cryptocurrencies and banking. Powell noted the growing acceptance of cryptocurrencies in mainstream finance and pointed to a necessary push for clearer regulatory frameworks, particularly in relation to stablecoins.
The shift in regulation aligns with former Trump administration efforts to endorse the cryptocurrency sector, including the establishment of a dedicated SEC crypto task force. Additionally, efforts were made to rescind an accounting directive that had restricted banks from offering custodial services for digital assets, showing a significant push towards a more supportive banking environment for cryptocurrencies.
Overall, this move from the Fed could mark a pivotal moment for banks looking to explore digital assets, and could spur further innovations in the cryptocurrency sphere.
