Federal Reserve Withdraws Crypto Directives, Senator Lummis Calls for More

Senator Cynthia Lummis has criticized the Federal Reserve’s recent decision to withdraw certain crypto-related supervisory directives, describing the move as “just noise, not real progress.” In a statement shared on April 25, Lummis argued that the withdrawals are insufficient and do not address the underlying issues within the industry. She accused the Fed of previously restricting access to banking services for crypto companies, which she believes has harmed American competitiveness.

Lummis specifically mentioned that the same Fed staff responsible for what she termed “Operation Chokepoint 2.0” remain in place. This term is used by some crypto advocates to describe efforts to isolate the sector from traditional banking. She suggested that these staff members continue to influence crypto policy, undermining the progress made by the recent withdrawals.

The Federal Reserve announced on April 24 that it had rescinded multiple directives regarding banks’ involvement in digital asset activities. Among the measures withdrawn were a 2022 supervisory letter that required banks to notify regulators before engaging in crypto activities and a 2023 directive that mandated supervisory non-objection before offering services related to dollar tokens. The central bank will now monitor banks under the standard supervisory framework without requiring advance notification.

According to the Fed, these changes are part of a broader effort to recalibrate regulatory oversight of digital asset activities while maintaining financial stability. In coordination with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), the Fed withdrew two joint statements from 2023 that warned banks about potential liquidity risks associated with digital assets.

Lummis also highlighted the Fed’s ongoing reliance on reputation risk assessments in bank supervision, noting that the central bank did not rescind the Policy Statement in Section 9(13). This policy deems activities involving Bitcoin (BTC) and other cryptocurrencies as unsafe and unsound, creating regulatory hurdles for banks interested in offering crypto-related services. She argued that despite surface-level moves, the Fed continues to illegally deny fair access to crypto firms’ master accounts.

In contrast, Lummis acknowledged that the OCC and the FDIC have taken steps to move away from reputation-based evaluations, leaving the Fed isolated in its approach. The withdrawals come amid broader political shifts that have seen a more crypto-friendly tone in Washington. With the administration signaling support for digital assets, banking relationships with crypto firms are showing early signs of revival after years of strained access to traditional financial services.

Lummis reiterated her commitment to legislative oversight of the Federal Reserve’s actions concerning the digital asset sector. She stated that she would continue pressing for reforms to ensure crypto firms receive a fair opportunity to operate within the US financial system. The senator, a longtime advocate for integrating digital assets into the regulatory framework, has frequently called for clarification around bank supervision, master account access, and legal definitions related to cryptocurrencies.

Her latest statement reflects continuing tensions between federal regulators and lawmakers seeking to normalize crypto within the banking system. Lummis’s criticism underscores the need for more substantive changes in regulatory policy to support the growth and integration of digital assets in the financial sector.