The U.S. Federal Reserve has abruptly reversed its stance on crypto banking, scrapping strict guidelines that once discouraged banks from engaging with digital assets. The move, announced April 24, signals a major shift toward fostering innovation in the rapidly evolving crypto sector.
Federal Reserve Axes Crypto Banking Restrictions
The Fed revoked a 2022 supervisory letter requiring banks to notify regulators in advance of crypto-related activities. Simultaneously, it withdrew a 2023 policy limiting state banks stablecoin ventures. These rules had long been criticised for stifling institutional participation in crypto markets. Now, oversight will fall under standard supervisory processes, eliminating bureaucratic hurdles for banks exploring blockchain services.
Why the Fed Changed Its Stance
Previously, regulators warned that crypto posed risks to financial stability, consumer protection, and anti-money laundering efforts. In 2022 guidance, the Fed highlighted concerns about stablecoin “runs” disrupting payment systems.
However, mounting pressure from pro-innovation advocates and the Trump administration’s push for a crypto-friendly economy prompted a reevaluation. “New guidance must balance risks while supporting responsible innovation,” the Fed stated, hinting at future rulemaking.
Banks Gain Flexibility in Crypto Ventures
Banks can now pursue crypto projects without seeking prior approval, streamlining their entry into digital asset services. Analysts predict this could accelerate institutional adoption of stablecoins and blockchain infrastructure. On the other hand, the Fed clarified that risks will still be monitored through routine audits. “This doesn’t mean a free pass; it means trust in banks due diligence,” a Fed official noted.
Regulators Unite in Easing Crypto Warnings
The Fed joined the FDIC and OCC in rescinding 2023 warnings about crypto fraud and misleading disclosures. Those documents had urged banks to vet crypto clients rigorously, citing scams and market volatility. Critics argued the guidance was overly broad, deterring partnerships with legitimate firms. Withdrawal aligns agencies under a unified, less adversarial approach, a stark departure from earlier skepticism.
Trump Administration Pushes Pro-Crypto Agenda
The policy reversal marks the Trump administration’s latest effort to position the U.S. as a crypto innovation hub. In March, the OCC revoked Obama-era advisories urging caution in crypto dealings. Similarly, the SEC nixed a rule forcing banks to list crypto holdings as liabilities, a move hailed by industry leaders. “Washington is finally acknowledging crypto’s economic potential,” said Blockchain Association CEO Kristin Smith.
Industry Cheers, Critics Voice Concerns
Crypto firms applauded the Fed’s decision, calling it a win for financial modernisation. “Banks can now build the next generation of payment systems,” said Ripple CEO Brad Garlinghouse. Conversely, consumer advocates warn deregulation might expose users to fraud. “Scrapping guardrails risks repeating the 2008 crisis,” cautioned Better Markets CEO Dennis Kelleher.
What’s Next for Crypto Banking?
Regulators hinted at drafting new guidelines to address emerging technologies like stablecoins. The Fed also plans to collaborate with Congress on federal crypto frameworks. For now, banks face fewer barriers but the road ahead remains uncertain. As Coinbase CFO Alesia Haas noted, “Clarity is coming, but the industry must prove its reliability first.”
