The Federal Reserve has rescinded its 2023 cryptocurrency restriction policy, easing constraints on banks' "novel" crypto initiatives

On December 18, the Federal Reserve (Fed) rescinded a restrictive 2023 policy statement that imposed a "strongly opposed presumption" on state member banks’ participation in the crypto industry. The central bank said the change reflects an updated understanding of associated risks, replacing the 2023 rule with a more flexible 2025 version. Under the new policy: - State member banks with FDIC deposit insurance remain bound by strict restrictions under Section 24 of the Federal Deposit Insurance Act (FDIA). - State member banks without deposit insurance may now seek Fed approval on a case-by-case basis for certain previously prohibited crypto-related activities. This expands regulatory room for banks to engage in new crypto asset activities. The Fed noted in its statement that since the 2023 policy’s release, both the financial system and regulators have updated their understanding of innovative products and services. Though the prior rule did not outright ban crypto activities, it effectively blocked banks from holding Bitcoin, Ethereum, and other crypto assets on their balance sheets or issuing stablecoins in practice. The adjustment marks another sign of the U.S. regulatory landscape’s ongoing shift, coming amid the Trump administration’s public backing for the digital asset industry. Earlier this summer, the Fed also shuttered the 2023-established special regulatory program for crypto banks and jointly issued digital asset custody guidelines with the Office of the Comptroller of the Currency (OCC) and FDIC.