FameEX Hot Topics | Federal Reserve Withdraws Policy Blocking Banks from Crypto Activities

The U.S. Federal Reserve has taken a significant step toward easing restrictions on banks' involvement with cryptocurrencies by withdrawing its 2023 guidance that limited Fed-supervised banks, including uninsured ones, from engaging in crypto activities. This move reflects a broader pivot among U.S. regulators toward a more accommodating stance on digital assets.

The 2023 policy required uninsured state member banks to adhere to the same activity restrictions as federally insured institutions, based on the principle that similar risks warrant similar regulation. This effectively barred many banks from offering crypto services, as such activities were not explicitly permitted for national banks, often disqualifying uninsured institutions from Fed membership or related privileges.

On December 17, 2025, the Fed announced the withdrawal, citing that the guidance had become outdated amid evolving financial systems and improved understanding of innovative products like cryptocurrencies. Simultaneously, it introduced new guidance establishing a formal pathway for both insured and uninsured state member banks to pursue “innovative activities,” including crypto-related ones, provided they meet robust risk-management standards.

Fed Vice Chair for Supervision Michelle Bowman praised the change, stating it creates opportunities for responsible innovation while maintaining banking sector safety. However, Governor Michael Barr dissented, warning that relaxing equal treatment could encourage regulatory arbitrage and undermine financial stability. This development is seen as a boost for crypto-focused banks like Custodia, previously impacted by the old rules.

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