Federal Reserve Removes Outdated Crypto Banking Restrictions, Paving the Way for Innovation

The Federal Reserve Board announced Thursday that it has withdrawn previous supervisory guidance related to banks' crypto-asset and dollar token activities.

The Federal Reserve has removed outdated restrictions on crypto-asset and dollar token activities by banks, paving the latter's way for innovation, broader access, and mainstream digital asset adoption.

The central bank said Thursday it has withdrawn previous supervisory guidance related to the institutions' crypto-asset and dollar token activities to better align oversight with emerging risks and foster innovation in the financial sector.

The bank will no longer expect state member banks to provide notification and will instead monitor banks' crypto-asset activities through the normal supervisory process, according to the announcement.

"The Board has rescinded its 2022 supervisory letter that had requested state member banks to provide the Department of Banking and Finance with notice of any planned or current crypto-asset activities by a state member bank or a bank holding company."

The Board has also revoked its 2023 supervisory letter concerning a supervisory nonobjection process for engagement in dollar token activities.

"The Board will work with the agencies to consider whether additional guidance to support innovation, including crypto-asset activities, is appropriate," the Federal Reserve added.

The decision follows similar moves by U.S. banking regulators. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently withdrew crypto-related guidance issued during the Biden administration.

In response to the Federal Reserve's announcement, U.S. Senate Banking Committee Republicans praised the action.

"Chairman Tim Scott applauds the Federal Reserve for following the OCC and the FDIC in taking the much-needed to rescind harmful Biden-era guidance that reduced access to financial services for the digital asset industry," the Republicans wrote on X.

White House crypto czar David Sacks also commented on X: "It's great to see the Federal Reserve reversing Biden-era rules that were created as part of Operation Chokepoint 2.0. Opening up banking to crypto will help drive further mainstream adoption."

The coordinated steps by federal agencies suggest a broader shift toward a regulatory environment that encourages innovation while maintaining supervision.