U.S. Fed Declares: No Additional Scrutiny Required for Banks’ Cryptocurrency Operations
Federal Reserve Announces End of Crypto Regulation Initiative
The Federal Reserve (Fed) has announced that it will soon conclude a program initiated during the Biden administration, aimed specifically at enhancing regulation of cryptocurrencies and fintech activities in the banking sector. This signifies the Fed’s intention to reintegrate the regulatory insights and practical experience accumulated over the past two years back into routine supervisory processes. This move aligns with the recent trend of U.S. regulatory agencies releasing new guidelines, adopting a more open stance to allow banks to provide clearer cryptocurrency-related services.
Crypto Regulation Initiative Launched After Silicon Valley Bank Collapse
In 2023, the collapse of three U.S. banks associated with the cryptocurrency industry, including Silicon Valley Bank, prompted regulators to heighten their vigilance. In the same year, the Fed established the Novel Activities Supervision Program, aimed at strengthening oversight of digital assets and blockchain activities within banks. The purpose of this program was to help regulatory bodies comprehensively understand the sources of risks associated with cryptocurrencies and their management, ensuring the stability of the financial system.
(Silicon Valley Bank’s assets sold off, First-Citizens Bank officially acquires for $16.5 billion)
Reputation Risk No Longer Under Review
By 2025, the Fed indicated that it had developed a certain level of understanding regarding crypto and fintech activities and had gradually accumulated risk control experience. In June of this year, the Fed announced the removal of “Reputation Risk” from its bank inspection criteria. Reputation risk, as defined by the Fed, refers to the potential risks that arise from negative public opinion, which can damage a bank’s business image and even lead to costly litigation. However, many banking professionals have expressed that this type of risk assessment often involves subjective judgment, resulting in penalties for some legitimate, yet unrecognized, business practices.
In response, the Fed ultimately decided to eliminate “Reputation Risk” from its evaluations, redirecting its focus toward quantifiable financial risk indicators.
(The Wall Street Journal: Trump plans to sign an executive order to halt Chokepoint 2.0, supporting the crypto industry against banking discrimination)
Policy Returns to Normalcy, Integrating Crypto and Traditional Business
As July rolled in, the three major U.S. financial regulatory agencies—the Fed, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)—issued the “Guidelines for Managing Risks Associated with Custody of Crypto Assets.” These guidelines require banks offering custody services to comply with legal and risk management regulations and to establish robust internal controls. Officials emphasized that this is not a new obligation, but rather a more pragmatic operational guideline to facilitate traditional banks’ entry into the crypto custody business.
Subsequently, on August 16, the Fed announced the termination of the Novel Activities Supervision Program, which had been launched in 2023, incorporating the relevant regulatory experience into regular inspection processes. This means that banks, whether engaged in custody, lending, or stablecoin issuance, will align their processes with traditional financial business practices without the need for additional reviews. This action continues the trend of regulatory easing that began in 2025, such as the April withdrawal of the requirement for prior approval for banks to initiate crypto-related businesses, with the FDIC and OCC also following suit.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, with prices potentially experiencing significant volatility, and you may lose your entire principal. Please assess the risks carefully.
