New Fed Guidance Opens Door for State Banks to Use Crypto

• The Federal Reserve withdrew its 2023 policy that limited banks from offering crypto services.
• The earlier guidance affected uninsured banks and influenced Custodia Bank’s denied master account.
• A new framework allows banks to pursue innovation while meeting safety standards.

The U.S. Federal Reserve on Wednesday withdrew a 2023 policy statement that had effectively restricted certain state-chartered banks, including uninsured institutions, from engaging in innovative financial activities such as crypto-related services. The move marks a shift in how the central bank approaches new technologies within the banking system.

The 2023 guidance had aligned the rules for state member banks with those applied to federally insured institutions, limiting activities considered “novel or unprecedented.” 

That framework played a role in the Fed’s earlier decision to deny Custodia Bank access to a master account.

Related: FDIC Moves to Formalize How Banks Can Issue Stablecoins Under GENIUS Act

The New Fed Guidance

In its place, the Federal Reserve issued a new policy statement under Section 9(13) of the Federal Reserve Act, outlining how it plans to evaluate innovative activities going forward. 

The updated guidance applies to both insured and uninsured state member banks and is designed to create clearer pathways for banks to pursue new business models while maintaining safety and soundness.

Crypto References Removed From Official Guidance

As part of the change, the Fed also withdrew supplementary material from 2023 that specifically addressed crypto-asset activities. Officials said the earlier guidance no longer reflected current market conditions or the central bank’s evolving view of the sector.

The withdrawal follows a broader rollback of crypto-specific supervisory statements issued in 2022 and 2023, signaling a move away from prescriptive restrictions toward case-by-case assessments.

Different Risks, Different Rules

Under the new framework, the Fed reaffirmed the principle of “same activity, same risk, same regulation,” while also acknowledging that different activities may require different regulatory treatment. 

Uninsured state member banks seeking to engage in activities not permitted for insured banks will still require approval, with regulators assessing capital strength, liquidity, risk management, and resolution planning.

The policy takes effect upon publication in the Federal Register and is intended to provide greater regulatory clarity rather than impose binding new rules.

A Shift in Tone, Not a Free Pass

While the change opens the door to broader experimentation, the Federal Reserve also stressed that legal permissibility alone is not enough. Banks must show internal controls and the ability to manage risks without threatening financial stability.

“By creating a pathway for responsible, innovative products and services, the Board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective,” Vice Chair for Supervision Michelle W. Bowman said.

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