Regulators say outdated rules no longer reflect the evolving financial system
The US Federal Reserve has formally withdrawn a 2023 policy guidance that restricted how Fed supervised banks could engage with cryptocurrency-related activities. The decision signals a notable shift in regulatory posture as US financial authorities reassess how digital assets fit within the traditional banking system.
Why the Fed Reversed Its Crypto Guidance
The withdrawn guidance required uninsured state member banks to follow the same restrictions as federally insured institutions. In practice, this barred certain banks from offering crypto services and, in some cases, blocked access to Federal Reserve membership.
According to the Fed, the policy was rescinded because the financial system and regulators’ understanding of innovative products have materially evolved since 2023. As a result, the framework was deemed no longer appropriate.
The decision was welcomed by industry participants who argued the earlier guidance unfairly limited innovation. Some institutions had been denied access to critical banking infrastructure, including master accounts that allow direct settlement with the central bank, due to crypto involvement.
New Framework for Innovation
Alongside the withdrawal, the Fed issued new guidance creating a formal pathway for both insured and uninsured banks to pursue innovative activities, including cryptocurrencies, provided they meet risk management and safety standards.
The decision was not unanimous. One governor dissented, warning that easing restrictions could encourage regulatory arbitrage and undermine financial stability. Despite this, the move reflects a broader regulatory recalibration toward crypto integration within the US banking system.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.