Fed Opens Pathway for Banks to Engage with Crypto
The US Federal Reserve has withdrawn its 2023 guidance that restricted Fed-supervised banks, including uninsured institutions, from participating in crypto activities. The now-rescinded rules required uninsured banks to follow the same regulations as federally insured ones, effectively prohibiting them from offering crypto services if those were not allowed for national banks. The Fed stated that evolving financial systems and better understanding of innovative products made the previous guidance outdated. Following this change, both insured and uninsured state member banks supervised by the Fed now have a formal process to pursue innovative activities such as cryptocurrencies, as long as risk-management standards are met. Fed Vice Chair for Supervision Michelle Bowman supported the move, highlighting its role in fostering safe innovation. However, Governor Michael Barr dissented, arguing that rescinding the policy could encourage regulatory arbitrage and undermine fair competition and financial stability. The decision reflects a broader shift by US regulators toward greater openness to digital assets.
