Fed Ends Special Crypto Oversight Program, Integrates Into Standard Supervision

The U.S. Federal Reserve has officially terminated its specialized oversight program for cryptocurrency and fintech-related activities conducted by banks, integrating these responsibilities into standard bank supervision [1][3]. The initiative, launched in 2023, was designed to provide the central bank with a comprehensive understanding of the risks and management practices associated with digital assets and emerging financial technologies [3]. After two years of focused monitoring, the Fed has concluded that it now has sufficient insight to manage these activities within its regular supervisory framework [1].

As part of the transition, the Fed has rescinded the supervisory letter that established the specialized program, marking a shift in regulatory strategy [3]. This move reflects the central bank’s confidence that traditional oversight mechanisms can adequately address crypto-related risks without the need for a dedicated, specialized regime [3]. The decision is also seen as a sign that regulators now consider crypto and fintech to be mature enough to operate within standard banking frameworks [1].

While the change may encourage greater collaboration between banks and crypto firms—reducing the perception of the sector as experimental or overly risky—some analysts caution that the absence of a dedicated oversight structure could result in oversight gaps, particularly for emerging risks like those posed by decentralized finance (DeFi) products or sophisticated custody solutions [3]. If traditional regulatory tools fail to evolve at the same pace as crypto innovation, there could be challenges in detecting and managing new forms of financial risk [3].

The Fed’s decision has drawn mixed reactions from the digital asset community. Some view it as a positive step toward the normalization of crypto, potentially improving access to banking services for exchanges and blockchain-based businesses [3]. Others, however, have expressed concerns that the removal of heightened scrutiny may reduce regulatory attention to rapidly evolving innovations in the sector [3].

The shift follows the successful completion of the two-year monitoring period during which the Fed evaluated the risk profiles and control systems of banks involved in crypto activities [1]. The central bank emphasized that the move does not indicate a reduced concern for crypto-related risks, but rather a judgment that conventional supervisory tools are now adequate to manage those risks [3].

This regulatory change could influence the broader financial landscape by setting a precedent for how other jurisdictions might integrate digital assets into traditional financial systems. However, the long-term success of the approach will depend on the ability of existing frameworks to adapt to the fast-paced innovation in the crypto sector [3].

Source:

[1] Federal Reserve Board announces it will sunset its novel activities supervision program and return to monitoring banks' novel activities through the normal

(https://news.google.com/home?ceid=US:en&gl=US&hl=en-US&pz=1&tab=nn)

[3] Federal Reserve to End Special Oversight of Crypto and

(https://cryptodnes.bg/en/federal-reserve-to-end-special-oversight-of-crypto-and-fintech-bank-activities/)