The U.S. Federal Reserve (Fed) has revoked its 2023 guidance that had tightened regulations on banks' cryptocurrency activities, allowing banks without deposit insurance to apply for permission to participate in the digital asset sector on a case-by-case basis.
The U.S. Federal Reserve has officially withdrawn its 2023 restrictive policy statement, which placed strong assumptions against allowing state member banks to engage in novel cryptocurrency-related activities, marking a significant shift in the agency's stance on risks in the digital asset sector.
In a statement released Wednesday, the Fed said that since the policy statement was issued, the financial system and the agency's understanding of innovative products and services have developed significantly. The new policy will be more flexible, allowing the Fed to assess each case individually rather than applying broad restrictions as before.
A more flexible regulatory framework for banks.
According to the updated 2025 policy statement, member banks in states with FDIC deposit insurance remain subject to strict limitations under Section 24 of the Federal Deposit Insurance Act. However, banks without deposit insurance can now apply to the Fed for permission to engage in activities not permitted for insured banks through a case-by-case XEM mechanism, according to the newly released 12-page document .
The Fed emphasizes that activities with the same type of risk should be subject to the same regulatory framework, while activities with different risks should have their own appropriate regulatory framework. This view explains why some novel activities need to be XEM for more flexible regulation rather than being completely restricted.
This move comes amid a wave of major regulatory changes in the US, driven by President Donald Trump's public support for digital assets. This summer, the Fed closed its cryptocurrency banking supervision program, established in 2023, and, along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, released guidance on protecting digital assets.
The Fed's 2023 policy statement, while not directly banning all cryptocurrency activity, created a strong presumption against state member banks engaging in novel or unprecedented cryptocurrency activities unless those activities XEM clearly permitted by the national bank. In practice, this effectively prevented the inclusion of Bitcoin or ETH on bank balance sheets or the issuance of stablecoins.
However, some have opposed this change, including Federal Reserve Governor Michael S. Barr, who argues that equal treatment levels the playing field for banks with different licenses, thereby reducing regulatory arbitrage risks. Barr stressed that the 2023 policy statement was issued with unanimous support.
Eleanor Terrett from Crypto in America said the 2023 guidance laid the groundwork for the Fed's rejection of Custodia Bank's request for access to the Fed's main account. Custodia, founded in 2020 by Caitlin Longing , is a dedicated depository institution under Wyoming state charter, operating as an uninsured bank with 100% reserves, and can now seek approval to conduct many novel activities that were previously restricted.
