U.S. Federal Reserve Pulls Plug on Crypto Oversight Program

The Novel Activities Supervision Program was launched via SR 23-7 in August 2023 under the Federal Reserve Board’s supervision structure, during the tenure of Vice Chair for Supervision Michael S. Barr. It was designed to deliver dedicated, risk-based expertise to assess and oversee emerging risks related to crypto-asset custody, stablecoin (dollar token) issuance, crypto trading, DLT projects, and complex fintech partnerships (e.g., BaaS and nonbank collaborations). Its creation followed the early-2023 failures of Silicon Valley Bank, Silvergate Bank, and Signature Bank, each heavily tied to crypto or fintech services and it deployed specialist supervisory teams embedded within existing structures to better monitor and manage these novel risks.

Two years later, the Federal Reserve asserts that it now possesses a sufficiently robust understanding of the risks and banks’ internal risk management practices in crypto and fintech areas. Consequently, the Fed has decided the separate program is no longer necessary.

Going forward, oversight of these activities will be folded into routine examinations within the standard regulatory process. As part of this transition, the Board has rescinded the 2023 supervisory letter that established the program.

Banks engaged in crypto-related activities, such as issuing dollar tokens, entering technology partnerships, or offering crypto custody, will now be evaluated under existing safety and soundness expectations via normal supervisory channels.

The decision is also part of a broader easing of crypto-specific oversight among U.S. regulators. In April 2025, the Federal Reserve withdrew several supervisory letters and joint statements, including a 2022 letter requiring advance notification of crypto-asset activities and a 2023 one requiring nonobjection for stablecoin initiatives.

The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency joined the Fed in rescinding earlier warnings and restrictions. The OCC, for its part, issued Interpretive Letter 1184, clarifying that banks may offer crypto-asset custody services and other crypto-related operations under existing authority, provided they maintain prudent third-party risk controls. These shifts reflect broader policy preferences under the current administration to support innovation in financial technology while moving away from prior frameworks that required advance permissions.

For banks, the change reduces regulatory friction. They can now proceed with crypto-related services, such as stablecoin issuance, custody, or digital asset trading, without seeking specialized approvals. This is expected to lower procedural barriers and may accelerate institutional adoption of blockchain-based financial products.

The move also signals supervisory confidence. By reintegrating oversight into the normal examination cycle, the Fed is indicating that its examiners now possess the knowledge and tools to assess crypto-related risks without the need for a specialist program.

However, this does not mean banks are free from obligations. They remain responsible for adhering to safety and soundness standards, as well as broader compliance and risk management obligations. The Federal Reserve will continue to monitor activities as part of demonstrations of internal risk protocols.

While procedural hurdles have eased, the absence of explicit crypto-specific guidance means banks must interpret expectations carefully. Novel activities may still receive additional scrutiny within the broader supervisory framework.

This development fits into a larger U.S. policy pivot toward crypto integration. Earlier this year, the White House issued an executive order establishing a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile, signaling crypto’s growing role in national strategy. At the same time, regulators withdrew crypto-specific supervisory guidance and non-objection requirements and issued clarifications intended to support innovation in the banking system, most notably the Fed’s April 24 2025 withdrawal of prior letters and statements, and the OCC’s Interpretive Letter 1184 confirming bank authority to provide crypto-asset custody (with appropriate risk controls).

The Federal Reserve’s decision to retire its Novel Activities Supervision Program ends a specialized approach to crypto banking oversight. With a strengthened understanding of these activities, the agency is reintegrating crypto oversight into its normal supervisory process. This shift may lower procedural hurdles for banks while putting greater emphasis on internal risk management, and it aligns with this year’s withdrawal of crypto-specific supervisory guidance. As banks navigate this environment, regulators will continue to assess practices through the traditional examination framework.