On August 15, the Board of Governors of the Federal Reserve (the “Board”) announced that it will end its novel activities supervision program, rescind the associated supervisory letter creating the program and return to monitoring banks’ novel activities through the normal supervisory process. The Board established the program in August 2023 “to ensure that the risks associated with innovation are appropriately addressed” with a focus on: (1) “complex, technology-driven partnerships with non-banks to provide banking services”; (2) “crypto-asset related activities”; (3) “projects that use [digital ledger technology] with the potential for significant impact on the financial system” and (4) “concentrated provision of banking services to crypto-asset related entities and fintechs.” In ending the program, the Board noted that it “has strengthened its understanding of crypto-assets and fintech activities, related risks and bank risk management practices” and is determined to “integrat[e] that knowledge and the supervision of those activities back into the standard supervisory process.”
The Board’s announcement is consistent with other recent crypto-friendly actions taken by banking and financial market regulators. For example, in May, the OCC issued Interpretive Letter 1184, which clarified that national banks may buy and sell crypto-assets held in custody at their customers’ direction. In March and April, each of the federal banking regulators issued a statement providing that banking organizations within their respective jurisdictions need not receive prior supervisory non-objection before engaging in permitted crypto-asset activities. The announcement also is consistent with crypto-friendly actions taken by the executive branch, including the recent executive order on “debanking,” and Congress, including the passage of stablecoin legislation.