Federal Reserve joins FDIC and OCC in abandoning cryptocurrency-critical guidance
In a significant regulatory shift, the Federal Reserve withdrew three pieces of Biden-era guidance related to banks' engagement in cryptocurrency in April 2025. This move eliminates prior requirements for banks to notify and receive supervisory non-objection before engaging in crypto asset activities, treating crypto more like a conventional financial asset class.
Following this, the Federal Reserve, OCC, and FDIC issued a joint statement in July 2025, providing updated guidance focused on risk management for crypto-asset safekeeping. The statement emphasizes that banks must manage legal, operational, technological, and compliance risks according to established safety and soundness principles, but does not impose new regulatory requirements.
This regulatory pivot from prescriptive approvals to a principles-based, institution-specific risk assessment framework signals a normalization of cryptoassets within the banking sector.
Impact on Fintech Disruption:
The rescission of restrictive guidance removes prior supervisory obstacles, encouraging banks to expand crypto-related services such as custody, execution, and stablecoin activities. It incentivizes innovation by aligning regulatory expectations with evolving industry risks while supporting fintech growth in digital banking and crypto-asset services.
By allowing banks to outsource crypto activities under the updated framework, it enables collaboration between traditional banks and fintech firms, further accelerating disruption and integration of crypto technologies in mainstream finance.
Implications for Regulatory Framework Development:
The regulatory focus has shifted towards risk management and compliance rather than prior approval or prohibition, fostering a more flexible and adaptive supervisory environment. This approach supports a market environment where cryptoassets are considered a novel but manageable asset class, comparable to other financial products, which may guide future regulatory policies.
The withdrawals and new statements likely pave the way for further regulatory harmonization across banking agencies, clarifying legal expectations while avoiding unnecessarily prescriptive measures that could stifle growth. These changes align with parallel updates at the SEC and other agencies, creating a more consistent crypto regulatory landscape supporting institutional involvement in crypto markets, including improved mechanisms like in-kind creation and redemption for crypto ETFs.
In summary, the Fed's withdrawal of the Biden-era crypto guidance and the subsequent joint statement by banking regulators facilitate fintech disruption by lowering regulatory barriers and emphasizing risk-based oversight. This promotes innovation while fostering the development of a more mature, principles-driven regulatory framework that treats cryptoassets on par with traditional financial assets.
Notably, Sen. Cynthia Lummis, R-WY, has been named chair of the Senate's first-ever panel on digital assets, and three years ago, she introduced a bill aimed at giving the digital asset industry a regulatory framework. However, her opinions on the recent changes have been mixed, with statements suggesting that they are more symbolic than substantive.
The Securities and Exchange Commission, under a new administration, has also shown a more pro-crypto stance, with the creation of a task force for regulatory framework development for cryptocurrency. Regulators under the previous administration have been perceived as unamenable to digital assets, with allegations of a concerted effort, known as Operation Choke Point 2.0, to keep crypto out of the traditional financial sector.
As the regulatory landscape continues to evolve, it remains to be seen how these changes will impact the crypto industry and mainstream finance in the long term.
- The recent regulatory shift regarding cryptocurrency by the Fed, OCC, and FDIC will likely incentivize personal-finance and business innovations in the crypto industry, as banks are now free to invest in and offer services like crypto custody, execution, and stablecoin activities.
- The new focus on risk management and compliance, rather than approval or prohibition, in the crypto regulatory framework will foster a technological integration of crypto technologies in mainstream finance, paving the way for collaboration between traditional banks and fintech firms.
- Thechanged crypto regulatory landscape, with less restrictive guidance and a more principles-driven approach, will encourage investment in social-media, entertainment, and other sectors that are embracing digital payment systems powered by crypto technologies.
