Federal Reserve Encourages Banks to Serve Crypto Clients Without Fear of Penalties

Federal Reserve Vice Chair for Supervision Michelle Bowman addressed the Wyoming Blockchain Symposium, acknowledging that crypto firms have faced debanking due to regulatory uncertainty. She emphasized that banks should not fear penalties for serving customers engaged in lawful crypto activities, stating that customer selection decisions rest solely with bank management.

Bowman revealed the Fed's recent policy shift to remove reputational risk barriers, allowing financial institutions to serve digital asset companies operating legally. The central bank is updating examination manuals to ensure lasting implementation of this policy, moving away from an "overly cautious mindset" toward blockchain innovation.

The Fed official warned regulators must choose between shaping technological frameworks or risk seeing innovations bypass traditional banks entirely. This could diminish the banking sector's economic relevance as crypto adoption grows.