Crypto Relief? Fed Axes Banking Oversight Program Targeting Digital Assets

U.S. Federal Reserve terminated its Novel Activities Supervision Program, launched in 2023 to scrutinize banks involved in cryptocurrencies, stablecoins, and fintech partnerships. The program, criticized as part of “Operation Chokepoint 2.0,” allegedly restricted crypto firms’ access to banking services. The Fed now integrates these activities into its standard supervisory framework, signaling a shift toward normalized oversight.

The decision rescinds the 2023 supervisory letter (SR 23-7), which required banks to notify the Fed before engaging in crypto-related activities like custody, lending, or stablecoin issuance. The Fed’s move reflects confidence in its understanding of digital asset risks, gained over two years, allowing oversight through routine processes. This aligns with a broader regulatory shift under the Trump administration, including the SEC dropping crypto investigations and the FDIC easing banking restrictions.

Crypto advocates on X, like @SenLummis, hailed the decision as a “big win” for ending targeted supervision, potentially easing banking access for exchanges and startups. @BtcBlackthorne noted it as a significant policy pivot, fostering mainstream integration. However, the Fed emphasized that banks must still meet strict risk management and compliance standards.

The move could boost market confidence, encouraging capital inflows and bank partnerships with crypto firms. With U.S. regulators softening their stance—evidenced by the GENIUS Act for stablecoin clarity and relaxed FDIC rules—the crypto sector may see reduced friction. Yet, oversight by the SEC and CFTC persists, and banks must navigate existing regulations carefully. As the industry watches for further clarity, this decision marks a step toward mainstreaming digital assets in U.S. finance.