Fed Backs Crypto Freedom as Banks Gain Regulatory Clarity

The U.S. Federal Reserve has indicated that American banks should engage with cryptocurrency-related activities without fear of regulatory penalties, signaling a shift in the central bank’s stance toward digital assets. This position emerged as the Fed announced it would discontinue a two-year-old program that had been designed to monitor how banks interact with emerging fintech and crypto technologies. The central bank justified the decision by asserting that it already understands the associated risks and that such oversight is integral to its broader supervisory role [2]. The move has been interpreted as an implicit endorsement of greater flexibility for banks in the crypto space, aligning with broader regulatory trends under the Trump administration, which has pushed for a more crypto-friendly environment.

The Federal Reserve’s decision to terminate its “novel activities” program reflects a broader trend in U.S. financial policy. Recent executive orders and regulatory initiatives have aimed to streamline engagement between traditional banks and the rapidly evolving crypto sector. This includes measures to reduce legal and operational barriers for banks, which have historically been cautious about handling digital assets due to the risk of regulatory scrutiny. By removing this specific oversight function, the Fed appears to be aligning itself with the administration’s push to foster innovation and attract global crypto leadership to the United States [2].

Meanwhile, a coalition of finance industry groups has called on the Basel Committee on Banking Supervision to reconsider its proposed standards for crypto asset risk management. The group, which includes major financial institutions and crypto industry representatives, argues that the current standards are overly restrictive and economically impractical for banks seeking to enter the crypto market. The proposed Basel rules, set to take effect in January 2026, impose stringent capital requirements on crypto activities, effectively discouraging banks from participating in what the letter describes as a fast-evolving and increasingly integrated asset class. The signatories have urged a temporary pause in implementation to allow for revised guidance that better aligns with current market dynamics [5].

In parallel, U.S. Treasury officials have launched a public comment period as part of the implementation of the GENIUS Act, a key legislative framework for stablecoin regulation. The initiative seeks to combat illicit crypto activity and enhance regulatory clarity for financial institutions. The effort involves gathering innovative methods for detecting and preventing money laundering and other financial crimes in the digital asset space. This marks an important step in the broader regulatory rollout, which has seen the U.S. government moving quickly to establish a structured policy framework for crypto assets, including stablecoins, under the Trump administration [3].

The regulatory environment has also been influenced by active engagement from state securities regulators, who have emphasized the importance of maintaining antifraud enforcement authority in the crypto sector. The North American Securities Administrators Association (NASAA) has submitted detailed feedback on federal proposals, including the Digital Asset Market Clarity Act and the Responsible Financial Innovation Act. NASAA has expressed concerns over potential constraints on state enforcement flexibility, particularly around the interpretation of “investment contracts” under federal securities law. The group has advocated for the inclusion of the Support Anti-Fraud Enforcement Act (SAFE Act) in upcoming legislation to preserve states’ ability to police crypto-related misconduct [4].

The evolving landscape highlights the growing interdependence between traditional finance and digital assets. As regulatory frameworks continue to develop, the role of banks in the crypto ecosystem is expected to expand, provided that legal and operational hurdles are mitigated. The Federal Reserve’s decision to eliminate its specialized crypto oversight program, along with broader regulatory shifts at both federal and state levels, suggests that U.S. financial institutions may soon find it easier to serve crypto clients without fear of regulatory pushback. This could have far-reaching implications for the competitiveness of the U.S. financial system in the global digital economy.

Source:

[1] Crypto and Fintech Executives Urge Trump to Block Bank Data Fees (https://www.fintechweekly.com/magazine/articles/crypto-fintech-execs-urge-trump-to-block-bank-data-fees)

[2] Federal Reserve Eliminates Specific Program to Police Crypto and Fintech Initiative (https://www.bankingexchange.com/news-feed/item/10389-federal-reserve-eliminates-specific-program-to-police-crypto-and-fintech-initiative)

[3] U.S. Treasury Starts Work on Stablecoin Law, Gathering Views on Illicit Activity (https://www.coindesk.com/policy/2025/08/18/u-s-treasury-department-starts-work-on-genius-gathering-views-on-illicit-activity)

[4] State Securities Regulators Stake a Claim in Crypto Asset Markets (https://www.sidley.com/en/insights/newsupdates/2025/08/state-securities-regulators-stake-a-claim-in-crypto-asset-markets)

[5] Finance Industry Bodies Call for Changes to Crypto Rules for Banks (https://www.reuters.com/legal/government/finance-industry-bodies-call-changes-crypto-rules-banks-2025-08-19/)