Federal government conclusely abandons close supervision of cryptocurrencies as debate around "debanking" intensifies within the Federal Reserve.
The United States Federal Reserve has announced the retirement of its specialized oversight program for emerging financial activities, including cryptocurrencies and fintech services. This decision marks a significant moment for the broader financial sector, as the central bank aims to integrate crypto and fintech supervision into its regular, standard bank supervisory process.
Launched in 2023, the Novel Activities Supervision Program was designed to closely monitor banks' engagement with cryptocurrencies, stablecoins, and other emerging financial technologies. The program was intended as a temporary measure to build knowledge quickly. Over the past two years, the Federal Reserve has developed sufficient expertise and understanding of these activities, making dedicated supervision no longer necessary.
This shift represents a transition from an "emergency" or "special watch" posture to a steady-state regulatory approach. It treats crypto activities like any other banking function, reducing procedural hurdles for banks considering crypto involvement. The move aligns with similar moves by other federal regulators in 2025 who have relaxed aggressive crypto oversight and dropped crypto-specific guidance requirements, thereby normalizing crypto oversight into traditional frameworks.
While the Federal Reserve is confident conventional supervisory tools can manage crypto risks, observers note mixed reactions. The move may encourage more bank-crypto partnerships but raises concerns about oversight gaps for rapidly evolving innovations such as decentralized finance (DeFi) and custody solutions.
Senator Cynthia Lummis, a prominent advocate for cryptocurrency, commented on the recent development, describing it as the Federal Reserve killing the targeted supervision of digital asset banking activities. The decision does not necessarily mean an immediate end to all regulatory scrutiny on cryptocurrencies and related activities.
The Federal Reserve formally rescinded its 2023 supervisory letter (SR 23-7) establishing the program and emphasized ongoing expectations for risk management under regular supervision. The decision follows mounting political pressure and criticism from pro-crypto lawmakers, who have portrayed the program as part of a broader "debanking" effort targeting digital asset companies. The program has been labelled "Operation Chokepoint 2.0", an alleged campaign to restrict banking access for politically disfavoured industries.
In summary, the Federal Reserve's decision reflects a broader regulatory shift toward integrating crypto oversight into standard banking supervision rather than maintaining a separate, specialized unit. This move is expected to foster growth and competitiveness in the crypto and fintech sectors while ensuring appropriate risk management and oversight.
[1] Federal Reserve Press Release, "Federal Reserve Board Retires Novel Activities Supervision Program", August 15, 2025. [2] Wall Street Journal, "Fed Drops Crypto-Specific Oversight, Normalizing Regulation", August 16, 2025. [3] Federal Reserve Supervisory Letter, "Rescission of SR 23-7: Novel Activities Supervision Program", August 15, 2025. [4] CoinDesk, "Fed Retires Crypto Oversight Program, Signaling Regulatory Shift", August 16, 2025. [5] Senator Cynthia Lummis Twitter Post, "Fed Kills Targeted Supervision of Digital Asset Banking Activities", August 16, 2025.
- The integration of crypto and fintech supervision into the Federal Reserve's regular bank supervisory process may lead to more business collaborations between banks and technology companies working in the finance sector.
- As the Federal Reserve normalizes crypto oversight into traditional frameworks, it is likely that finance magazines will feature more articles discussing the implications of this regulatory shift on the business and technology sector.
