Fed Smashes Banking Roadblock for Crypto—Here’s What Just Changed

Wall Street’s old guard just lost a major moat. The Federal Reserve quietly axed a critical banking restriction that had kept crypto firms at arm’s length—now the floodgates could open.

No more begging for master accounts. Digital asset companies can finally access payment rails directly, bypassing the traditional gatekeepers who’ve been collecting tolls for decades. The 20th-century financial playbook is officially obsolete.

But let’s not throw confetti yet. The same institutions that called crypto a ’fraud’ five years ago will suddenly discover their ’blockchain strategy’ by Monday morning. Funny how regulatory clarity appears when profits are at stake.

Trump Admin Makes Good On Crypto Campaign Promise

The policy shift realizes US President Donald Trump’s campaign vow to make the United States crypto-friendly. This completes the process of rolling back restrictions on banks looking to participate in lawful activities in the blockchain space, reports banking industry observers.

The Federal Reserve was the third of the big bank regulators to pull its crypto guidance letter, following the same actions by the Federal Deposit Insurance Corporation (FDIC) late last month and the Office of the Comptroller of the Currency (OCC) earlier that month.

Previous Restrictions Created Barriers For Banks

Under the 2023 guidance which has since been withdrawn, banks regulated by the Fed were instructed to notify its lead supervisory point of contact at the Federal Reserve before engaging in any crypto-asset-related activity.

The limits were imposed after a series of crises struck the digital currency sector in 2022, prompting regulators to issue warnings about possible dangers. A lawsuit between the FDIC and cryptocurrency exchange Coinbase implied that banks under supervision very infrequently, if at all, ever gained approval to venture into crypto businesses when they made such requests.

Instead of needing special pre-advance notice, Bitcoin operations will be screened through the Fed’s regular bank oversight process. The Federal Reserve also withdrew its 2023 policy that restricted bank participation with stablecoins, which are commonly referred to as “dollar tokens.”

The Fed also withdrew from two joint statements issued with other agencies that had highlighted potential threats of fraud, misinformation, and unstable money flows associated with cryptocurrency firms.

The decision is set to ease compliance requirements and present fresh opportunities for banks in the crypto asset business. The Board will coordinate with the agencies on whether additional guidance to facilitate innovation, including digital asset business, is needed, the Fed said in announcing the move.

This comes on the heels of a January decision by the Securities and Exchange Commission to undo a rule that had compelled banks holding crypto to categorize it as a liability.

The Fed has indicated that it will continue to keep an eye on risks related to digital assets, but through routine oversight instead of special limitations.

Featured image from Manhattan Institute, chart from TradingView