US Fed to End Program Supervising Banks' Crypto Activities

The U.S. Federal Reserve is preparing to wind down its specialized program that oversaw how banks engaged with cryptocurrency-related activities, according to recent reports. This move signals a shift in the regulator’s approach to digital assets within the traditional financial system.

Background

The Fed had launched the supervisory program to closely monitor how banks were experimenting with crypto custody, stablecoin issuance, and blockchain-based settlement systems. The goal was to ensure risks—such as money laundering, market volatility, and cybersecurity threats—were properly addressed.

However, the program also became a barrier to entry for banks willing to explore blockchain innovations, as many institutions viewed it as overly restrictive.

Why It Matters

Less Oversight, More Freedom: With the program ending, banks may find it easier to develop or adopt crypto-related services.

Regulatory Shift: The Fed could be signaling that crypto activities should fall under general banking rules, rather than needing a separate layer of scrutiny.

Market Impact: This decision could encourage traditional banks to re-enter or expand in the digital asset space, potentially bridging the gap between Wall Street and Web3.

Concerns Remain

Critics warn that loosening oversight could expose the financial system to risks tied to volatile cryptocurrencies and unregulated stablecoins. Supporters, however, argue that ending the program removes unnecessary red tape and allows banks to compete with fintech and crypto-native firms.

Conclusion

The end of the Fed’s crypto supervision program highlights the ongoing struggle between innovation and regulation. Whether this will accelerate mainstream adoption of digital assets—or create new vulnerabilities—remains to be seen.