FDIC Eliminates Prior Approval for Banks' Crypto Activities

In a significant move that could reshape the landscape of digital finance in the U.S., the Federal Deposit Insurance Corporation (FDIC) has made a dramatic policy shift regarding crypto regulation, causing ripples throughout the banking sector.

On April 8, 2025, Acting Chairman Travis Hill addressed the American Bankers Association’s Washington Summit and announced a groundbreaking change: banks are no longer required to seek prior approval to engage in permissible crypto activities. This announcement marks a pivotal moment in how the U.S. banking system perceives blockchain, digital assets, and innovation.

For years, banks have operated under a veil of uncertainty, hesitant to engage in crypto-related activities due to regulatory hurdles. However, this is rapidly changing.

Hill emphasized that the FDIC’s updated policies aim to reduce barriers rather than create new ones. The previous requirement for banks to notify the FDIC before engaging in crypto activities has been eliminated.

“FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior FDIC approval,” Hill stated. This policy change aligns crypto activities with other bank-approved services, providing the clarity that the industry has long sought.

Hill also hinted at the agency’s exploration of broader definitions of permissible activities, including custody services, stablecoin reserves, and operating validator nodes on public blockchains. These activities have already been embraced by other nations, and the U.S. may now follow suit with appropriate safeguards in place.

“While a complete prohibition on interacting with public chains is clearly too restrictive, what guardrails would be prudent?” Hill asked, initiating a policy conversation that the industry has long awaited.

The most notable aspect of Hill’s speech was his openness to banks working with public blockchains—a significant departure from the cautious stance regulators have taken in the past.

Historically, U.S. regulators have restricted interaction with public, permissionless networks due to concerns over privacy, risk, and control. However, the FDIC now appears ready to challenge this position, focusing on setting standards that allow for safe participation rather than outright prohibition.

This shift could spark a new wave of innovation, particularly in tokenized banking, decentralized finance (DeFi) integrations, and blockchain-based compliance frameworks.

The FDIC’s focus is not limited to crypto infrastructure. Hill also addressed stablecoin legislation currently under consideration in Congress, highlighting the urgent need for clarity around liquidity risk, cybersecurity, and compliance in tokenized deposits.

He proposed a critical review of pass-through deposit insurance rules, suggesting that the FDIC is working toward a future where stablecoin reserves are treated similarly to traditional deposits. “Deposits are deposits, regardless of the technology or recordkeeping deployed,” he said.

This has significant implications for how banks structure tokenized products, protect customers, and report risk.

Hill also cautioned about smart contracts that could automatically withdraw funds in the event of a bank failure—a scenario that could disrupt resolution protocols and increase costs. This indicates that while the FDIC is opening doors, it remains vigilant about systemic safety.

The message from the FDIC is clear: the era of vague rules and passive resistance is over. Instead, the agency is developing a framework that encourages responsible experimentation, lowers entry barriers, and aligns the U.S. banking system with the realities of modern finance.

What lies ahead could be transformative: banking services that run on blockchains, crypto-backed products issued by FDIC-insured institutions, and perhaps even stablecoin systems that integrate seamlessly with legacy infrastructure.

One thing is certain—this shift was more than just a policy update. It was a turning point, and the entire digital finance world is taking notice.