U.S. Fed Officially Scraps Specialist Group Meant to Oversee Crypto Issues
The Federal Reserve made a significant decision on Friday to discontinue a special supervisory program that was put in place two years ago to monitor banks’ involvement in the cryptocurrency market. This move signals a shift towards a more relaxed approach to overseeing crypto activities within the banking sector.
The Novel Activities Supervision Program was initially established during the tenure of Vice Chairman Michael Barr, who was appointed by former President Joe Biden. However, the program is now being phased out, with the central bank opting to integrate the monitoring of banks’ crypto activities into its regular supervisory processes.
This decision aligns with a broader trend among banking regulators, including the Federal Reserve, to ease up on stringent oversight of digital assets. In April, the Federal Reserve withdrew its previous guidance that required banks to seek approval from government supervisors before engaging in new crypto-related activities. This move was mirrored by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., signaling a shift towards allowing banks to make their own decisions regarding crypto under existing risk-management protocols.
The rationale behind the novel-activity program was to enhance the Fed’s understanding of the risks associated with innovative technologies and their potential impact on the banking system. However, after two years of operation, the Fed has deemed it unnecessary to maintain a separate program for this purpose, citing a stronger grasp of the risks and risk management practices associated with novel activities.
The crypto industry and U.S. banking regulators have faced challenges in recent years, with digital asset firms and industry insiders accusing government entities of attempting to restrict their access to banking services. This perceived campaign, dubbed Operation Chokepoint 2.0, has been met with criticism from the industry and its supporters in Congress. However, the appointment of crypto-friendly officials by former President Donald Trump has led to a more favorable regulatory environment for digital assets.
Overall, the Federal Reserve’s decision to phase out the Novel Activities Supervision Program reflects a broader trend towards a more permissive stance on crypto activities within the banking sector. This move is expected to provide banks with greater flexibility in engaging with digital assets while maintaining effective risk management practices.
