Federal Reserve Eases Crypto Restrictions for Banks in Major Policy Shift

The decision brings the Federal Reserve into alignment with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), both of which had already rolled back similar guidance earlier this year. It also reflects a broader shift in Washington under the Trump administration, which has prioritized financial innovation and sought to reduce regulatory burdens viewed as stifling to technological progress.

The crypto industry largely welcomed the move as a major win. Michael Saylor, Executive Chairman of Strategy and a vocal Bitcoin advocate, quickly celebrated the decision on X, noting that "banks are now free to support Bitcoin." His post emphasized the potential for greater institutional participation in the crypto economy.

Previously, banks were required to notify and receive approval from regulators before offering services related to digital assets, including crypto custody, stablecoin issuance, and tokenized deposits. This framework was intended to ensure financial stability following the collapse of several high-profile crypto firms in 2022, including FTX. However, critics argued that it created excessive red tape, discouraging U.S. banks from competing globally in the rapidly growing digital asset economy.

In its press release, the Federal Reserve stated that while it was rescinding the requirement for pre-approvals, banks engaging in crypto activities must still adhere to "safe and sound banking practices". The Fed also hinted that it would collaborate with other agencies to potentially develop "new guidance" that balances innovation with risk management.

"The Board will work with the agencies to consider whether additional guidance to support innovation, including crypto-asset activities, is appropriate," the statement read.

Crypto market analysts predict that the policy shift could unlock new waves of adoption among traditional financial institutions. Banks will now face fewer hurdles in offering crypto custody services, trading platforms, and stablecoin products, areas where U.S. players had fallen behind counterparts in Europe and Asia.

However, the Federal Reserve’s move has drawn criticism from some lawmakers and regulatory hawks. Senator Cynthia Lummis (R-WY), a longtime advocate for clearer crypto legislation, warned that the withdrawal amounted to "lip service" unless accompanied by robust legal frameworks.

"Without comprehensive legislation, the fundamental risks to consumers and the financial system remain," Lummis said in a statement. She and other lawmakers have called for Congress to pass the long-delayed Digital Asset Market Structure Bill, which aims to create a unified regulatory environment for digital assets.

Industry experts note that while the Fed’s move is a major deregulatory signal, banks are unlikely to rush headlong into crypto without clear regulatory protections.

For now, the withdrawal of the restrictive guidance marks an important symbolic and practical victory for the U.S. crypto industry. It signals that major regulators are reassessing their risk calculus regarding digital assets, and are more willing to give traditional banks room to innovate, rather than boxing them out of emerging markets.

As the financial landscape evolves, all eyes will be on how U.S. banks respond to this newfound regulatory freedom and whether policymakers can craft the next generation of rules to ensure that innovation proceeds without endangering financial stability.