In a move to ease its oversight of cryptocurrency, the Federal Reserve announced on Friday that it is discontinuing a two-year-old supervisory program designed to closely monitor banks' ties to crypto. This task will now be incorporated into the Fed's regular day-to-day oversight.
The program, known as the Novel Activities Supervision Program, was introduced during the tenure of Vice Chairman Michael Barr, who was appointed by President Joe Biden. According to a statement released by the Fed, the agency will now 'return to monitoring banks' novel activities through the normal supervisory process.' Since the beginning of President Donald Trump's second term, the Fed has been aligning its stance with other banking regulators, who have also scaled back their scrutiny of digital assets. In April, the Federal Reserve withdrew its previous guidance on crypto, which had required bankers to obtain approvals from government supervisors before engaging in new crypto activities.
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp followed suit, allowing banks to make their own decisions regarding crypto under existing risk management expectations. The Novel Activities Supervision Program was initially established to gather expertise and focus on risks to the banking system posed by innovative and untested technologies, particularly in the aftermath of the 2023 crisis that led to the failure of three US lenders closely associated with technology and crypto clients. However, the Fed has since 'strengthened its understanding of those activities, related risks, and bank risk management practices,' and will therefore direct the work back to the regular supervisory process. The relationship between the crypto industry and US banking regulators has been tumultuous, with the industry complaining of a coordinated effort by government entities to restrict their access to banking services.
However, with the appointment of crypto-friendly officials by President Trump, the banking agencies, including the Fed, have generally adopted a more relaxed approach to crypto regulation.