The Fed Lightens Its Control Over Banks Active in Crypto

After several years of heightened caution, the US Federal Reserve changes course regarding the crypto activities of banks. The institution ends its specific monitoring program. It believes, indeed, that the risks linked to digital assets are now better understood and manageable within the traditional supervisory framework.

A decision that marks a regulatory turning point for crypto

The US Federal Reserve announced on Friday the end of its special monitoring program dedicated to banks involved in crypto-related services. This program came into existence in 2023. It required institutions wishing to engage in the custody of digital assets, stablecoins, or tokenization to notify the Fed and follow strict rules. The goal was to regulate a sector considered risky and still poorly understood at the time.

Today, the central bank believes it has gained better mastery of the issues. In a statement, it explains having significantly increased its understanding of crypto activities. It states to understand their risks and the practices linked to cryptos in bank management. Therefore, this specific Fed monitoring now appears redundant.

This development does not erase all supervision. However, it ends a framework considered more restrictive than usual banking oversight. Crypto-related activities will now be evaluated within the standard supervisory process.

What changes for banks and the market

For American financial institutions, this decision lightens the administrative burden. It may also accelerate the integration of crypto services into their offerings. Banks will no longer have to comply with a separate protocol. However, they must still demonstrate their ability to manage risks, according to traditional standards.

This change could also encourage new entrants. Hesitant players, deterred by cumbersome procedures, can now operate differently. Indeed, they might more easily consider projects around stablecoins, crypto custody, or tokenized payment solutions.

On the market side, the news sends a signal of regulatory easing. In fact, the US is often criticized for its excessive caution towards crypto. This opening could enhance the competitiveness of American banks compared to European or Asian players who are already more advanced.

While the Fed loosens the grip, it does not give up its control mission. Activities related to crypto, stablecoins, or tokenization will remain integrated into regular audits and inspections, with special attention to operational risks, cybersecurity, and compliance.