Federal Reserve officially backs off 2023 bank crypto restrictions permanently

The Fed dropped its old 2023 rule and replaced it with a new policy that gives state member banks room to use innovative tools without being stuck under the limits created two years ago.

The Board said the financial system changed enough to make the earlier rule useless. The new move applies to both insured and uninsured banks under the Fed’s watch and brings direct consequences for crypto-linked firms that want stable access to payment rails.

Fed changes federal access for crypto companies in America

“New technologies offer efficiencies to banks and improved products and services to bank customers,” Vice Chair for Supervision Michelle Bowman said.

The 2023 policy forced state member banks to follow the same activity rules that other federal regulators used. It also tried to lay out how banks should handle new tools. After it came out, the Board said the financial system shifted and its own understanding grew, so it cleared the rule and replaced it.

The new policy lets banks under the Fed take part in certain innovative activities, which matters for firms like Circle, Paxos, Tether, and BitGo. These companies will now place customer reserves directly at the Fed instead of routing everything through commercial banks. That lowers costs and cuts counterparty risk while giving them more control over flows.

Some companies tried other ways to reach the Fed’s payment system.The big one was specialty banking charters.

One example is Wyoming’s Special Purpose Depository Institution setup, built for crypto companies. Custodia Bank, one of the first to use it, sued the Federal Reserve Board and the Kansas City Fed for what it called “a patently unlawful delay.” A court dismissed the case, and Custodia appealed. That case is still active.

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