Federal Reserve Eases Crypto Banking Restrictions

Federal Reserve Chair Jerome Powell has reaffirmed the central bank's stance on cryptocurrency activities, stating that the Fed does not object to U.S. banks providing services to cryptocurrency companies or engaging in crypto-related activities, provided they adhere to established risk management and consumer protection standards.

Powell's statement came during his semiannual monetary policy report testimony before the House Financial Services Committee on June 24. This reaffirmation follows recent steps by federal regulators to remove barriers that have historically restricted crypto’s access to traditional banking services.

The Federal Reserve Board formally removed “reputational risk” from its bank supervision framework on June 23. This move directs examiners to focus on measurable financial exposures rather than subjective standards. This decision aligns the Fed with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, which made similar revisions earlier this year. Together, these three regulators oversee every federally insured depository institution in the United States.

The coordinated policy shift eliminates a broad and often opaque reason that examiners have used to deny banking services to crypto firms or prevent banks from offering services like Bitcoin trading or custody. Under the updated guidance, Fed staff will be retrained to implement the changes uniformly across all supervised institutions and will coordinate with peer agencies to ensure consistent oversight.

Powell laid the groundwork for this approach in April when he called on Congress to establish clear stablecoin rules and pledged that the Fed does not intend to interfere with lawful relationships between banks and crypto companies. He has since noted that while regulators took a cautious posture following the 2022 crypto market turmoil, some guidance may now be relaxed to support “responsible innovation” as long as banks maintain strong risk controls.

Industry participants have welcomed the removal of reputational risk and the Fed’s clear position as a milestone for integrating digital assets into the regulated financial system. Banks are expected to expand offerings ranging from basic accounts to crypto custody, payments, and settlement services.

Despite this regulatory openness, Powell also told lawmakers that the Fed still expects to consider cutting interest rates later this year, even though internal forecasts suggest inflation could remain elevated. This outlook has been noted by some economists as potentially confusing markets and clouding the broader policy picture.

Regulators have not provided a timeline for further guidance but have stressed that legal, liquidity, and credit risk standards remain firmly in place as banks scale up crypto-related activities.