The Federal Reserve has shut down its crypto-focused oversight program, which monitors crypto dealings by major banks. The central bank will revert to its regular supervisory process to monitor all crypto-related activities.
US banks can offer crypto services like dollar-backed stablecoins without prior approvals. The move is expected to broaden institutional participation in the digital asset ecosystem.
Federal Reserve Shuts Down Crypto Oversight Program
The United States Federal Reserve has shut down a program monitoring banks’ crypto activities. The decision was announced on Friday, with the bank stating it was shuttering its “Novel Activities Supervision Program.” The program kept a check on banks involved with crypto assets, blockchain experiments, and tech-heavy partnerships. The Novel Activities Supervision Program has been around since 2023, and has helped the Fed track “novel activities” within banks under its supervision. This included crypto custody, crypto-backed lending, blockchain-based lending, and working with tech companies to deliver banking services.
Easing Of Crypto Scrutiny
The Federal Reserve stated that since the Board started its crypto supervision program, it has strengthened its understanding of crypto activities, the risks associated with them, and bank risk management practices. With this understanding, the Board now plans to integrate the supervision of crypto-related activities into its standard supervisory process. The Federal Reserve Board also plans to rescind its 2023 supervisory letter, which led to the creation of the program. The initiative is believed to be one of the ways the SEC enforced “Operation Chokepoint” under the Biden administration.
The shuttering of the program follows President Donald Trump’s signing of an executive order to end unfair banking practices based on grounds including religion, politics, and other ideologies. The order also cited Operation Chokepoint and how the Federal Reserve coerced banks into cutting ties with prominent crypto firms and entities. The Federal Reserve, along with other banking regulators, recently gave banks the green light to custody crypto assets. The regulators clarified that the same rules that apply to the custody of other assets will apply to crypto assets.
A Big Win For The Crypto Industry
Senator Cynthia Lummis called the Federal Reserve’s decision a “big win” for the crypto ecosystem, and one that ends Operation Chokepoint 2.0. She noted that the Federal Reserve’s decision effectively stops the targeted supervision of crypto banking activities.
“Big win for putting an end to Operation Chokepoint 2.0. The Fed announced it is killing the targeted supervision of digital asset banking activities. There’s still more to do, but this is real progress toward a level playing field for crypto.”
However, she conceded there was still more to do, but added that the decision was a big step towards creating a level playing field for crypto. Strategy co-founder Michael Saylor also weighed in, stating that the “road is now clear for Bitcoin and banking.” Crypto journalist Eleanor Terrett stated that the Novel Activities Supervision Program was a major catalyst for Operation Chokepoint 2.0.
“The novel activities supervision program was a major catalyst for Operation Chokepoint 2.0, one banking lawyer told me. While the Fed has yet to rescind all of its anti-crypto guidance from the Biden era, this is another piece of the puzzle.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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