Federal Reserve Eases Cryptocurrency Regulatory Requirements: Revokes Bank-Related Guidance, Signals New Regulatory Direction
Federal Reserve Board Announces Withdrawal of Regulatory Guidance on Crypto Activities
The Federal Reserve Board announced on April 24 that it will withdraw regulatory guidance concerning banks’ involvement in cryptocurrency and dollar stablecoin activities, while simultaneously adjusting related regulatory expectations. This represents the Federal Reserve’s open attitude towards financial innovation and reflects the ongoing evolution of regulatory agencies’ risk assessments regarding crypto assets.
Regulatory Relaxation: Federal Reserve Withdraws 2022 Crypto Notification Requirement
According to the statement, the Federal Reserve has officially withdrawn the regulatory letter issued in 2022, which required state member banks to notify regulators in advance before engaging in crypto asset business. This requirement will no longer apply, as banks’ crypto activities will now be monitored through existing regulatory processes.
This means that banks wishing to advance or already involved in the cryptocurrency sector no longer need to make additional disclosures, but only need to comply with routine supervision, thereby simplifying the original administrative procedures.
2023 Stablecoin Regulatory Process Also Canceled
The Federal Reserve has also rescinded the supervisory nonobjection process for “dollar token activities” that was established in 2023. This process originally evaluated whether banks could legally participate in dollar stablecoin projects.
This move signifies that the Federal Reserve no longer requires banks to obtain prior regulatory “non-objection statements,” but instead incorporates such activities into daily regulatory oversight, indicating an increased risk tolerance towards innovative financial instruments like stablecoins.
Joint Action: Three Agencies Withdraw Crypto Statements Together
This regulatory easing is not solely led by the Federal Reserve. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) announced that they will jointly withdraw two joint statements issued in 2023 with the Office of the Comptroller of the Currency (OCC), which had previously restricted and warned banks regarding their involvement and exposure to crypto assets.
Supporting Innovation: Federal Reserve Releases Regulatory Flexibility
The Federal Reserve emphasized that the purpose of this change is to ensure that regulatory expectations remain aligned with market risk developments while supporting the banking sector’s exploration in innovative fields. The statement mentioned that in the future, the Federal Reserve will collaborate with other regulatory agencies to issue new guidance as needed, to support the sound development of emerging financial activities such as crypto assets.
In other words, this does not mean that the Federal Reserve has fully relinquished regulation, but rather that it has chosen a more flexible approach that is closer to the actual operations of the industry in response to the rise of crypto assets.
Relaxation Does Not Mean Laxity: Crypto Finance Remains in Focus
While these measures are seen as regulatory easing, they also indicate that regulatory agencies are adjusting their strategies from “report first, execute later” to “continuous supervision, flexible response.” The Federal Reserve is attempting to find a balanced path between innovation and risk.
For the banking industry, this will provide them with more flexibility to engage in the crypto and stablecoin sectors; for the crypto industry, this is another potential positive signal from policy.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and their prices can be highly volatile. You may lose all your principal. Please carefully assess the risks.
