Federal Reserve Withdraws 2023 Guidance That Restricted Uninsured Banks’ Crypto Activities

TLDR:

• Federal Reserve withdraws 2023 guidance restricting crypto activities for uninsured state member banks.
• The 2025 policy enables innovative activities while ensuring bank safety and system stability.
• Uninsured banks need Board approval and strong controls to pursue crypto or digital assets.
• Updated guidance applies principles of “same activity, same risks, same regulation” for clarity.

The Federal Reserve has withdrawn its 2023 policy statement that limited state member banks’ activities, particularly regarding crypto assets. 

The new 2025 policy statement provides updated guidance, allowing both insured and uninsured state member banks to engage in innovative financial activities, including crypto-related services. 

The Board emphasizes that these activities must align with bank safety, soundness, and financial system stability. This marks a shift from the earlier restrictive approach, creating clearer pathways for banks exploring digital assets.

Rescission of 2023 Policy and Updated Crypto Guidance

The 2023 policy statement set a rebuttable presumption that state member banks could only engage in activities permitted for national banks. 

It also discussed specific crypto-asset activities, creating limitations for both insured and uninsured banks. Since its issuance, the Federal Reserve’s understanding of innovative products and emerging financial technologies has evolved. 

As a result, the 2023 guidance is considered outdated and has been fully withdrawn, along with the supplementary information addressing crypto activities.

The 2025 policy statement removes prior restrictions, enabling uninsured state member banks to pursue innovative activities with Board approval. Banks must demonstrate strong internal controls, liquidity, and compliance with capital standards. 

Permission is granted only if the bank can conduct the activity safely without risking financial stability. This approach allows banks to explore blockchain and digital asset services under defined regulatory safeguards.

The updated statement emphasizes a balanced approach, applying principles of “same activity, same risks, same regulation” and “different activity, different risks, different regulation.” 

By tailoring oversight to the type of activity, the Board facilitates innovation while preserving prudent supervisory standards. Banks engaging in crypto-related operations are expected to maintain operational readiness and risk mitigation practices.

The Federal Reserve’s withdrawal of the 2023 guidance signals a broader effort to modernize the banking sector’s approach to technology and digital assets. 

It provides clarity to state member banks about permissible innovation while maintaining the overall safety of the U.S. financial system.

Pathways for Uninsured Banks and Innovation

Uninsured state member banks now have a clear regulatory pathway to seek approval for activities not permitted for insured banks. 

The Board evaluates requests based on financial strength, loss-absorbing capacity, and operational controls. Banks must also demonstrate how they would address risks normally mitigated by deposit insurance. 

These requirements ensure that uninsured banks engaging in crypto activities operate within a safe and stable framework.

Insured banks continue to follow FDIC regulations, seeking approval for any activities outside those permissible for national banks. 

The 2025 statement clarifies how both insured and uninsured banks can engage in innovation while meeting supervisory expectations. Banks must maintain strong internal systems and adhere to state and federal legal standards.

By withdrawing the 2023 guidance, the Federal Reserve aligns its regulatory approach with current market conditions and technological developments. 

The updated framework reflects an evolved understanding of crypto-related risks, allowing state member banks to explore digital assets responsibly. This provides banks with flexibility to innovate without compromising safety or stability.

The 2025 policy statement creates structured guidance, supporting responsible innovation while preserving prudent oversight. 

It encourages state member banks to engage in emerging technologies and digital financial services under clear supervisory rules. This approach balances growth with the safety and soundness of the financial system.

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