In a move that signals a marked shift in regulatory strategy, the Federal Reserve announced on Friday the termination of its Novel Activities Supervision Program, a two-year-old initiative aimed at monitoring banks’ interactions with the rapidly evolving crypto sector. This decision aligns the Fed with other major U.S. banking regulators that have been easing their scrutiny of digital assets since the onset of Donald Trump’s second presidential term.
Shifting Gears: From Specialized to Standard Oversight
The Novel Activities Supervision Program was launched under the watch of Michael Barr, appointed by then-President Joe Biden as the Fed’s vice chairman for supervision. Its purpose was to amass specialized expertise to better understand and mitigate risks connected with emerging technologies—a response, in part, to the fallout from the 2023 banking crisis that saw the collapse of crypto-affiliated banks like Silicon Valley Bank, Silvergate Bank, and Signature Bank.
Despite the initial fanfare, the Fed now contends it has gathered sufficient insights into these novel banking activities. “We’ve fortified our understanding of the related risks and bank risk management practices,” the Fed’s statement asserted. Consequently, the task of overseeing banks’ crypto-related activities will revert to the normal supervisory process.
A Broader Regulatory Retreat
This latest development is not occurring in isolation. In April, the Fed, alongside the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), repealed previous guidance that required banks to seek approval from regulators before engaging in new crypto ventures. These moves have effectively left banks to navigate the crypto waters under existing risk-management frameworks, without additional regulatory hoops. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
Cryptocurrency insiders have long argued that there was an orchestrated attempt by government entities to restrict their access to banking services, a narrative encapsulated in the term “Operation Chokepoint 2.0.” However, the Trump administration has taken steps to appoint officials perceived as more crypto-friendly, influencing a more lenient regulatory environment. While the Fed maintains a stance of independence, it’s clear that its recent actions are in harmony with the broader deregulatory wave sweeping across U.S. banking oversight.
The Road Ahead: Navigating Uncertainty
The dismantling of this specialized oversight group raises questions about the future landscape of crypto regulation in the U.S. Will this relaxation encourage banks to dive deeper into the digital asset pool, or will it leave them more vulnerable to emerging risks? Cryptocurrency markets have been characterized by volatility and rapid innovation—elements that require vigilant oversight, some experts argue. This follows a pattern of regulatory shifts seen globally, such as the Philippine SEC’s recent actions against offshore crypto exchanges.
“There’s a real balancing act here,” noted Jamie Turner, a financial analyst at Crypto Insights. “On one hand, you want to foster innovation and let banks explore new technologies. On the other, you don’t want to repeat past mistakes where insufficient oversight led to significant financial instability.”
The Fed’s decision could be seen as a nod to the crypto industry, illustrating a shift towards a more hands-off approach. Yet, it also underscores a critical moment for banks as they independently chart their course in the crypto sphere without the safety net of specialized regulatory guidance.
Looking Forward: Implications for the Crypto Ecosystem
As the regulatory landscape evolves, stakeholders within the crypto space are left to ponder the implications. Some see this as an opportunity to innovate and integrate digital assets more deeply into traditional financial systems. Others caution that reduced oversight might precipitate unforeseen risks.
“The question is whether this trend towards deregulation will ultimately benefit the market or expose it to new vulnerabilities,” remarked Sarah Lindstrom, a blockchain strategist. “It’s a double-edged sword, and the coming months will be telling.”
The sunsetting of the Fed’s specialized crypto oversight program marks a significant inflection point. As banks transition to a new era of self-governance in the volatile world of digital assets, the industry watches closely—waiting to see if this newfound freedom will spur growth or invite chaos.
Source
This article is based on: U.S. Fed Officially Scraps Specialist Group Meant to Oversee Crypto Issues
Further Reading
Deepen your understanding with these related articles:
- SEC’s Long-Running Case Against Ripple Officially Over
- SEC and Ripple End Appeals, Closing Landmark Crypto Case as XRP Soars
- A16z, DeFi Group Pitch U.S. SEC on Safe Harbor for DeFi Apps
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
