Federal Reserve to End Crypto Banking Program

Federal Reserve to End Program That Targeted Crypto Banking

In a significant development for the cryptocurrency industry, the Federal Reserve has announced it will discontinue a dedicated program focused on crypto banking activities initiated during what some have termed the ‘Operation Chokepoint’ era. This decision follows previous efforts to address unfair banking practices.

Shifting to Standard Supervisory Process

According to a press release, the U.S. Central Bank will sunset its novel activities supervision program and integrate the monitoring of banks’ activities into its standard supervisory process. This indicates a move away from specialized oversight.

Enhanced Understanding Leads to Integration

The Federal Reserve stated that its initial program significantly enhanced its understanding of crypto and fintech activities within banks, including associated risks and bank risk management practices. As a result, the Board will incorporate this knowledge into its routine supervision.

Rescinding Supervisory Letter

Furthermore, the Board will rescind the 2023 supervisory letter that established the dedicated program. This action is seen as a step away from the regulatory approach enforced during ‘Operation Chokepoint’ under the previous administration.

This decision aligns with previous actions aimed at promoting fair banking practices, ensuring that financial services are not unfairly restricted based on subjective criteria. For example, past executive orders have targeted practices where banks were allegedly pressured to cut ties with crypto firms.

Guidance on Crypto Custody Remains

It's important to note that this isn't the regulator's first guidance on crypto banking. Last month, the Federal Reserve, along with other banking regulators, affirmed that banks could custody crypto assets, provided they adhere to the same rules that apply to the custody of other assets.