Changes in Financial Oversight: Crypto Notification Obligations Eliminated by Federal Reserve
The Federal Reserve, the central bank of the United States, has taken a significant step forward in its approach to digital assets, marking a clear evolution in the integration of cryptocurrencies into the traditional financial system.
In a landmark announcement on April 24, 2025, the Fed removed significant barriers to entry for banks under its supervision, easing restrictions on crypto engagement. This decision comes as regulatory bodies continue to refine their approaches to digital assets, with the future of effective supervision and regulatory oversight for cryptocurrency engagement by banks under the Federal Reserve's supervision evolving.
The Fed's concerns extend beyond individual bank safety to questions about how parallel financial systems might affect dollar dominance, payment systems, and the Fed's ability to implement monetary policy. However, the Fed must balance innovation with its mandate to protect financial stability.
The Fed's perspective on digital assets is important due to the growing and interconnected crypto markets with traditional finance. In response, the Fed has been working to establish clear standards and rules for banks' engagement with cryptocurrencies, including robust risk management frameworks and compliance with existing financial regulations.
On July 14, 2025, the Federal Reserve, OCC, and FDIC issued a joint statement outlining risk management considerations for crypto-asset safekeeping by banks. This guidance emphasizes the importance of banks having a strong control environment and understanding of crypto assets, but does not create new supervisory expectations.
The Fed has also withdrawn its previous guidance related to crypto assets and dollar token activities, reflecting a shift in regulatory policies under the Trump administration. For instance, the SEC's SAB 121, which limited banks' ability to provide crypto custody, was rescinded shortly after Trump's inauguration in 2025.
Looking ahead, efforts are underway to develop comprehensive legislative frameworks, such as the GENIUS Act, which aims to regulate stablecoins and provide a clearer legal environment for other digital assets. The future supervision will likely focus on ensuring that banks have robust risk management practices in place, including cryptographic key management, legal compliance, and third-party risk assessment.
For institutions navigating this evolving landscape, specialized tools and expertise can help engage with digital assets confidently and responsibly. Our brand name offers blockchain analytics solutions for effective AML/CFT controls, sanctions risk screening, due diligence on crypto businesses, monitoring blockchain activity for suspicious patterns, tracing funds across multiple assets and chains.
The Fed oversees state member banks and bank holding companies, and institutions can take a proactive role in shaping their compliance environments for digital assets, developing tailored frameworks, innovating rapidly, future-proofing operations, and building adaptable compliance muscle.
As regulatory barriers fall, financial institutions must improve their risk management and compliance capabilities to balance innovation with sound controls. Those institutions that can balance innovation with sound controls will be best positioned to thrive in this new era. This shift aligns with a broader pattern of regulatory change, following similar announcements from the OCC and FDIC.
In conclusion, the Fed's announcement is a significant milestone for the integration of digital assets into the traditional financial system, opening new opportunities for exploration and innovation in the crypto space. Institutions can take advantage of specialized tools and expertise to engage with digital assets confidently and responsibly, ensuring that crypto initiatives maintain the highest compliance and risk management standards.
The Fed's announcement emphasizes the importance of banks having a strong control environment and understanding of crypto assets for safer engagement in digital assets, a shift that aligns with a broader pattern of regulatory change. The future supervision will likely focus on ensuring robust risk management practices, including cryptographic key management, legal compliance, and third-party risk assessment.
With regulatory policies evolving, news of comprehensive legislative frameworks like the GENIUS Act emerges, aiming to regulate stablecoins and provide a clearer legal environment for other digital assets.
As financial institutions navigate this new era of technology-driven finance and blockchain adoption, they must improve risk management and compliance capabilities, leveraging specialized tools such as blockchain analytics for effective AML/CFT controls, sanctions risk screening, due diligence on crypto businesses, and monitoring blockchain activity for suspicious patterns.
