Federal Reserve withdraws crypto-unfriendly banking guidance
The Fed is withdrawing its supervisory letter from 2022, which required prior disclosure of planned or ongoing crypto-asset activity. The US Federal Reserve said that it is eliminating recommendations designed to discourage banks from engaging in cryptocurrency and stablecoin activity.
On April 24, the Federal Reserve’s Board of Governors announced it is rescinding its 2022 supervisory letter, which had required state member banks to provide advance notice of any planned or ongoing crypto-asset activities It stated that any crypto-related operations will henceforth be supervised under the Federal Reserve’s usual supervisory process.
The Federal Reserve is also retracting its 2023 supervisory letter that had restricted state banks from engaging in certain stablecoin-related activities. Its early guidance indicated that cryptocurrency could pose hazards to the American financial system’s safety and soundness, consumer protection, and financial stability.
Certain types of crypto-assets—such as stablecoins—could pose risks to financial stability if widely adopted, potentially triggering destabilizing runs and disruptions in payment systems At the time, the Federal Reserve also noted that cryptocurrency was widely utilised for money laundering and counter-terrorism financing.
The Fed also withdraws a statement warning banks of crypto fraudsters
The Federal Reserve, along with the FDIC and the Office of the Comptroller of the Currency, has withdrawn two 2023 policy statements concerning banks’ interactions with potential fraudsters in the crypto-asset sector.
“Inaccurate or misleading representations and disclosures by crypto-asset companies may be unfair, deceptive, or abusive, causing significant harm to retail and institutional investors,” the agencies wrote in their now-withdrawn joint statement.
The withdrawals are the Federal Reserve’s first big action against crypto operations under the Trump administration, which has launched many steps to make the US more crypto-friendly and promote innovation.
On Jan. 23, the Securities and Exchange Commission overturned a contentious rule requiring banks and financial institutions that hold cryptocurrency to declare it as liabilities on their balance sheets, removing a regulatory barrier that hindered crypto banking development.
Crypto-asset investments are high-risk; you may lose your capital