U.S. Fed Ends 3-Year Crypto Oversight Program Banks Shift to Traditional Supervision

The U.S. Federal Reserve announced on August 15, 2025, the termination of its Novel Activities Supervision Program, a three-year initiative that imposed tailored regulatory scrutiny on banks engaging in crypto-related activities [3]. This decision marks a return to traditional supervisory frameworks, signaling a significant shift in the regulatory approach to digital assets [4]. The move is expected to reduce compliance burdens on financial institutions, enabling banks to integrate crypto activities within standard regulatory guidelines [2].

The change in oversight model reflects a broader regulatory strategy aimed at promoting consistency and flexibility in supervising emerging financial technologies. By aligning crypto supervision with existing frameworks, the Fed aims to maintain financial stability while fostering innovation within the banking sector [8]. Senator Cynthia Lummis, a vocal advocate for responsible crypto regulation, praised the decision, stating it creates a more favorable environment for digital assets and encourages innovation in the financial industry [2].

Market participants have begun adjusting to the regulatory shift. Analysts suggest that the move may lead to a more stable environment for crypto investments over time, as banks refine their risk management and compliance frameworks to meet the updated expectations [3]. The transition has also triggered increased whale activity in the crypto space, with some observers noting a return of capital to previously undervalued projects [6]. While the immediate impact on market prices has been mixed, long-term implications could influence how banks engage in crypto custody, lending, and trading activities [4].

The termination of the program is in line with recent legislative and executive efforts to clarify the roles of regulators in the evolving financial ecosystem [8]. By simplifying compliance and reducing administrative burdens, the Fed’s move is expected to facilitate broader bank participation in digital asset services. However, financial institutions must remain vigilant and adapt their internal systems to ensure continued adherence to regulatory expectations [3].

Sources:

[2] Source: CoinCentral – Senator Cynthia Lummis Applauds Federal Reserve's Move

https://coincentral.com/senator-cynthia-lummis-applauds-federal-reserves-move-to-end-crypto-supervision/

[3] Source: AInvest – Fed Ends 2023 Crypto Oversight Program

https://www.ainvest.com/news/fed-ends-2023-crypto-oversight-program-integrating-supervision-routine-process-2508/

[4] Source: CoinCentral – Federal Reserve Ends Crypto Oversight Program for Banks

https://coincentral.com/federal-reserve-ends-crypto-oversight-program-for-banks/

[6] Source: Economic Times – Whale Accumulation Boosts Oversold Spark Crypto

https://m.economictimes.com/crypto-news-today-live-15-aug-2025/liveblog/123311478.cms

[8] Source: JD Supra – Focus on Fintech – Q2 2025

https://www.jdsupra.com/legalnews/focus-on-fintech-q2-2025-2446241/