US Fed ends special crypto, fintech bank oversight program

The US Federal Reserve will end its “novel activities” supervision program, which specifically monitored banks’ involvement with cryptocurrency and fintech, and will now fold this oversight into its standard bank supervision.

The program was introduced in 2023 to address how banks engage with emerging technologies.

The Fed said the dedicated initiative is no longer necessary as it has improved its understanding of related risks and how banks handle them.

This change marks a shift in the Fed’s approach to supervising bank activities in the cryptocurrency and fintech sectors.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Regulators are consolidating crypto oversight into existing frameworks

The Fed’s decision to scrap its specialized “novel activities” program reflects a broader regulatory trend toward streamlining crypto oversight.

Just months earlier, the FDIC rescinded its prior notification requirement for crypto-related activities, simplifying the process for banks to engage in such activities1.

This pattern suggests regulators are moving away from creating separate specialized programs and instead integrating digital asset supervision into their standard bank oversight processes.

The consolidation approach indicates that crypto and fintech activities are being treated as part of the evolving financial landscape rather than as exceptional risks requiring dedicated oversight teams.

2️⃣ Growing industry engagement has accelerated regulatory learning curves

The Fed’s confidence in integrating crypto supervision into regular oversight likely stems from increased exposure to these activities over the past two years.

The program launched in 2023 coincided with ongoing interest from crypto and fintech firms seeking to obtain charters to access the Federal Reserve’s payment systems2.

This sustained engagement would have provided Fed supervisors with practical experience in evaluating crypto-related risks across multiple institutions and business models.

The transition from specialized oversight to integrated supervision suggests the learning curve was steeper and more successful than initially anticipated when the program launched just two years ago.