Fed Opens Banking Gateway to Crypto Market
The central bank now joins other regulators - FDIC and OCC - to complete an effective relaxation of crypto rules for banks which they often found restrictive.
The Federal Reserve has removed a significant barrier for banks wanting to enter the cryptocurrency market, announcing it will no longer require advance notice for crypto and stablecoin-related activities.
The move aligns with similar reversals by the FDIC and OCC, effectively ending what critics called "Operation Chokepoint 2.0."
The central bank's decision withdraws four supervisory letters from 2022 and 2023 that had flagged cryptocurrency as a special risk category requiring explicit regulatory approval. Under the new approach, banks can treat crypto services like any other financial product, subject to standard supervisory processes.
The policy change completes a coordinated effort across US banking regulators to reverse Joe Biden-era restrictions that many in the crypto industry viewed as discriminatory.
Since US President Donald Trump's return to office, financial regulators have moved swiftly to implement a more crypto-friendly approach, with the SEC also revoking a rule on January 23 that required banks to record crypto holdings as liabilities.
Wall Street institutions that had previously avoided cryptocurrency due to regulatory uncertainty are now expected to develop a range of new products.
The competition between established banks and fintech startups could benefit consumers through more choices and potentially lower fees.
The most significant impact will be on stablecoins—cryptocurrencies designed to maintain a stable value by pegging to the dollar. The Fed's decision specifically rescinds guidance that discouraged banks from issuing or managing stablecoins.
This opens the door for regulated financial institutions to challenge current market leaders like Tether and USDC. Banking industry participation could address concerns about reserve backing and transparency that have plagued some stablecoin issuers.
Despite the regulatory thaw, the Federal Reserve continues to resist granting master accounts—direct access to the US payments system—to crypto-focused banks like Custodia and Kraken Financial.
This limitation creates an uneven playing field, allowing traditional banks to expand into crypto while specialized crypto institutions remain at a disadvantage. Representatives from crypto-native banks expressed frustration that this aspect of discrimination remains in place.
The policy reversal follows months of congressional pressure, including investigations led by Rep. James Comer, chair of the House Oversight Committee, into alleged politically motivated debanking of crypto companies.
"The documents that we are releasing today show that requests from these banks were almost universally met with resistance," said Travis Hill, Acting Chairman of the FDIC, in a February press release that foreshadowed the broader regulatory shift now unfolding.
As the US banking system opens to cryptocurrency innovation, the implications extend beyond America's borders. European and Asian financial centers may face increasing pressure to adopt similarly accommodative approaches or risk losing financial technology leadership to the United States.
For an industry that has operated largely outside the traditional financial system, the Fed's decision represents a watershed moment—one that could finally bridge the divide between conventional banking and the frontier of digital finance.