The US Federal Reserve has withdrawn its 2023 guidance that effectively restricted crypto-related activities, opening the door to a more flexible regulatory environment for uninsured banks.
A notable regulatory development has emerged from the United States as the Federal Reserve announced it has rescinded a 2023 policy that sharply limited banks’ involvement with crypto-related services. The guidance had been widely seen as a major obstacle, particularly for uninsured banks seeking Fed membership or offering digital asset services.
The withdrawn policy had constrained state-chartered banks under Fed supervision to a narrow set of activities, creating de facto barriers to crypto custody, stablecoin issuance, and holding digital assets on bank balance sheets. It also served as the key justification for rejecting the master account application of Custodia Bank, a Wyoming-based uninsured institution operating on a full-reserve model.
Under the updated 2025 framework, uninsured banks will be able to seek case-by-case approval from the Fed for certain novel or unconventional activities that remain off-limits to insured banks. While most restrictions on insured institutions remain in place, the Fed emphasized that risk perceptions around financial innovation have evolved significantly over the past two years, signaling a softer stance toward crypto banking in the post-crisis regulatory landscape.
