Federal Reserve Reverses Course, Lifts Crypto Constraints on Banks

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In a notable policy shift, the US Federal Reserve has revoked a 2023 directive that had constrained crypto-related engagements for the banks it oversees. This action aligns with a more favorable regulatory posture toward digital assets in the US.

The rescinded policy had imposed a level playing field, requiring uninsured state banks to follow the exact same rules as federally insured ones. The logic was that similar financial activities should be governed by identical safety and soundness regulations.

This effectively prohibited those banks from delving into services like crypto, which were not permitted for traditional national banks. Engaging in such activities made them ineligible for Fed membership, a critical component for banking operations.

According to the Fed, a central reason for the withdrawal is the guidance’s outdated nature. Officials acknowledged that the financial ecosystem and their own grasp of novel asset classes have developed since the policy’s introduction.

“Therefore, the 2023 policy statement is no longer applicable and has been removed,” the Board confirmed. The CEO of Custodia Bank, Caitlin Long, praised the move online, clarifying that this very guidance was the obstacle in her bank’s previously denied bid for a master account.