Federal Reserve Disbands Dedicated Crypto Oversight Unit
The Federal Reserve has officially dissolved its specialized supervisory program focused on banks' cryptocurrency activities. This move signals a broader trend among U.S. banking regulators to ease scrutiny on digital assets, integrating crypto oversight back into the Fed's regular, day-to-day supervisory processes.
Key Takeaways
- The Federal Reserve has shut down its Novel Activities Supervision Program.
- Crypto oversight will now be handled through the standard supervisory process.
- This follows a pattern of reduced crypto scrutiny by U.S. banking regulators.
Shift in Supervisory Approach
The Federal Reserve announced on Friday the discontinuation of its two-year-old Novel Activities Supervision Program. This program was initially established to provide a dedicated focus on banks' engagement with cryptocurrency and other novel technologies. The central bank stated that it has "strengthened its understanding of those activities, related risks, and bank risk management practices" over the past two years.
Consequently, the responsibilities previously handled by this specialized group will now be absorbed into the Fed's routine supervisory framework. This decision aligns with a broader relaxation of digital asset oversight by U.S. banking regulators, a trend that has been observed since the start of Donald Trump's second term.
Context and Industry Impact
The establishment of the Novel Activities Supervision Program occurred in the wake of the 2023 banking crisis, which saw the failure of three U.S. lenders—Silicon Valley Bank, Silvergate Bank, and Signature Bank—that had significant ties to technology and crypto clients. The program aimed to proactively identify and manage potential risks to the banking system arising from innovative technologies.
In April, the Federal Reserve, along with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), withdrew previous guidance that required banks to obtain government approval before engaging in new crypto activities. This withdrawal effectively allows banks to make their own decisions regarding crypto engagement, provided they adhere to existing risk-management expectations.
The crypto industry has frequently voiced concerns about what it terms "Operation Chokepoint 2.0," an alleged coordinated effort by government entities to restrict access to banking services for digital asset firms. While the Fed maintains its independence, its recent actions mirror the de-escalation of crypto constraints seen from the OCC and FDIC, suggesting a more permissive stance towards the sector.
Sources:
- Federal Reserve Board announces it will sunset its novel activities supervision program and return to monitoring banks' novel activities through the normal supervisory process
- Fed to scrap program devoted to policing banks on crypto, fintech activities
- FRB Rescinds Novel Activities Supervision Program and Vice Chair Bowman Speaks on Embracing Innovation
- As Federal Government Works to Liberalize the Crypto Payment Regulatory Regime, Federal Reserve Eliminates Specialty Supervisory Program Focusing on Crypto
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