Federal Reserve Ends Cryptocurrency Supervision Program

TLDR

• Federal Reserve ends its cryptocurrency supervision program.
• Major banks may expand crypto activities post-regulatory change.
• Optimism grows for institutional adoption of digital assets.

The Federal Reserve announced the end of its “novel activities supervision program,” which oversaw banks’ cryptocurrency and fintech activities. The program’s closure marks a shift to managing these sectors through the standard supervisory framework. This change could affect major banks such as Morgan Stanley and Citigroup, which participate heavily in cryptocurrency markets.

This announcement follows Michelle Bowman’s appointment as Vice Chair for Supervision. Initially implemented in 2023 under Michael Barr, the program addressed rapid advances in digital assets, requiring banks to get approvals for crypto ventures. The Federal Reserve’s decision aligns with a broader tendency towards lighter regulation in the crypto industry.

State of U.S. Crypto Regulations

The shift in regulatory oversight comes alongside similar actions by other federal institutions. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have lifted specific crypto-related supervisory frameworks, reverting to traditional risk management processes.

The Federal Reserve Board’s August 15, 2025, press release emphasized this regulatory integration. It cited the knowledge gained through previous oversight in understanding related risks. The Board’s decision to rescind its 2023 supervisory letter reflects these developments.

Impact on Major Banking Institutions

The regulatory shift is likely to encourage institutions like Morgan Stanley and Citigroup to expand their involvement in crypto activities, notably stablecoins. This change removes compliance-based restrictions that had previously hindered bank participation in digital asset activities.

These developments suggest positive sector growth for institutional adoption and related financial products. Stability in regulatory requirements could foster greater opportunities for custody, integration of crypto services, and other financial operations within traditional banks.

Key Cryptocurrencies and Financial Products

Major tokens, including Ethereum (ETH), Bitcoin (BTC), and various stablecoins, may experience positive sentiment due to this regulatory relaxation. Banks’ expanded participation in crypto markets is likely to enhance adoption of these digital assets.

Increased institutional engagements could open up new streams for the crypto ecosystem, possibly raising total value locked (TVL) and liquidity within DeFi protocols. These prospects are significant for stablecoin platforms and governance tokens, as they anticipate greater institutional participation.

Industry Reactions and Statements

“This marks the definitive end of what many referred to as operation ‘Choke Point,’ a coordinated effort by the federal government to debank the crypto industry.”

— MartyParty, Market Expert, Social Media/X

The market sentiment generally sees this as part of a broader trend towards lighter crypto regulation, countering previous aggressive regulatory tactics. This narrative aligns with the current administration’s declared goal of transforming the U.S. into a “crypto capital.”

Additional voices from within the crypto space and financial markets are expected to emerge, as stakeholders continue to assess the broader implications of these regulatory changes.

Further Insights and Data

While direct on-chain metrics like liquidity or staking flows have not yet been reported, expectations in the crypto sector remain optimistic. Financial institutions are poised to enhance their crypto adoption strategies as regulatory barriers diminish.

Additional announcements and regulatory updates will continue to influence the industry landscape. For more detailed information about the Federal Reserve’s evolving policies, refer to the official Federal Reserve’s announcement and related updates.