Federal Reserve withdraws anti-crypto banking guidance

The Federal Reserve has removed regulations that many regarded as hostile to cryptocurrency banking services.

In a policy reversal, the Fed is eliminating its previous rule that required banks to disclose crypto activities early.

The Federal Reserve is rolling back its earlier position that discouraged financial institutions from engaging in digital currency and stablecoin-related activities.

”The Board is rescinding its 2022 supervisory letter establishing an expectation that state member banks provide advance notification of planned or current crypto-asset activities,” the Board of Governors of the Federal Reserve explained in an April 24 statement.

The Fed has clarified that it will review digital asset activities under its existing supervisory framework.

The 2023 Fed letter, which shaped how state banks interacted with stablecoins, is now being officially rescinded.

The guidance was based on the idea that digital assets could compromise the integrity of the financial system, endanger consumers, and threaten economic stability in the U.S.

”Certain types of crypto-assets, such as stablecoins, if adopted at large scale, could also pose risks to financial stability including potentially through destabilizing runs and disruptions in the payment systems.”

The Federal Reserve flagged crypto for its widespread use in financial crimes, including money laundering and terrorism financing.

The Federal Reserve, in conjunction with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, has rescinded two 2023 announcements about banks’ involvement with fraud-related crypto-asset sector participants.

”Inaccurate or misleading representations and disclosures by crypto-asset companies […] may be unfair, deceptive, or abusive, contributing to significant harm to retail and institutional investors,” the agencies added in the now-withdrawn joint statement.

This withdrawal by the Federal Reserve signals the beginning of its more proactive stance on crypto under the Trump administration, which has worked to create a more crypto-friendly regulatory environment and support innovation across sectors in the U.S.

The Securities and Exchange Commission revoked a rule on January 23 that mandated banks and financial institutions treat crypto as a liability on their balance sheets, eliminating a regulatory barrier that had previously impeded the broader acceptance of crypto banking.