The Federal Reserve has rescinded most of its previous anti-crypto guidance, easing restrictions on U.S. banks. While banks now have more freedom regarding crypto activities, one significant restriction remains, which was board-approved. This ongoing guidance prohibits banks from issuing blockchain tokens, leaving them at a potential disadvantage compared to other financial institutions.
In a significant shift, the Federal Reserve has largely rolled back its previous restrictions on U.S. banks engaging in cryptocurrency activities. On April 24, the Fed announced the cancellation of supervisory letters from both 2022 and 2023 that had imposed limitations on banks’ involvement with crypto assets, effectively easing regulations designed to curb participation.
The 2022 supervisory letter had mandated state member banks to inform the Fed before participating in any crypto trading or custody operations. Meanwhile, the 2023 letter introduced a ‘supervisory non-objection’ process specifically for banks dealing with dollar-pegged stablecoins. With the reversal now in place, banks no longer need to give prior notice to the Fed when involved in crypto, as the Fed will only observe these activities through standard supervisory practices.
Additionally, the Fed rescinded two joint statements from 2023 made with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). These statements provided clarity on how banks could manage their risks involving crypto exposure. Following this regulatory easing, the Federal Reserve Board is set to collaborate with the OCC and FDIC to evaluate whether further guidance is necessary to promote innovation within the cryptocurrency sector.
The decision has been met with enthusiasm from various players in the crypto space. Michael Saylor, executive chairman of Strategy, noted that the Fed’s withdrawal of restrictions now opens the door for U.S. banks to support Bitcoin more freely, marking a pivotal moment in the intersection of traditional banking and cryptocurrency.
However, not all issues have been resolved. Eleanor Terrett, host of Crypto in America, highlighted a lingering obstacle pointed out by Caitlin Long, the CEO of Custodia Bank. She stressed that while 95% of the Fed’s anti-crypto guidelines have been rescinded, a significant restriction remains that has not been withdrawn and was approved by a 7-0 board vote.
This particular guidance, established on January 27, 2023, reflects the Fed’s concerns about banks issuing tokens via blockchain, which they deemed inconsistent with safe banking practices. As such, Long warns that Fed-regulated banks could be at a disadvantage when compared to those under the OCC or FDIC regulations concerning crypto activities. She remains hopeful that future legislation on stablecoins might clear up the existing confusion around the Fed’s stance, especially considering that the Fed has yet to align itself fully with goals laid out in former President Donald Trump’s crypto executive order aimed at fostering cryptocurrency growth.
