Federal Reserve Rescinds 2023 Crypto Guidance, Allowing Uninsured State Banks More Flexibility

Regulatory Evolution and Context

The 2023 policy had created a strong presumption against state member banks participating in crypto-related activities such as holding cryptocurrencies like Bitcoin or Ethereum or issuing stablecoins. While not an outright ban, the guidance effectively limited participation in emerging digital asset markets.

The Fed emphasized that activities posing different risks may require distinct regulatory frameworks:

“The Board generally believes that the same activity, presenting the same risks, should be subject to the same regulatory framework, and that a different activity, presenting different risks, should be subject to a different regulatory framework.”

Some officials, including Fed Governor Michael S. Barr, noted that consistent treatment across bank charters helps maintain a competitive balance and mitigate regulatory arbitrage. Barr highlighted that the 2023 Policy Statement had initially been issued with unanimous support.

Implications for Uninsured Banks

The updated policy affects uninsured banks seeking engagement in digital assets. Notably, Custodia Bank, a Wyoming-chartered special purpose depository institution founded by Caitlin Long in 2020, can now pursue previously restricted activities. Custodia operates as an uninsured bank holding 100% reserves and focuses on compliant banking, custody, and payment services for digital assets.

Under the previous guidance, Custodia was denied access to a Federal Reserve Master Account, as the 2023 policy had “underpinned” the Fed’s rejection, according to reporting by Crypto in America. The new 2025 guidance allows such institutions to apply for approval on a case-by-case basis.

Ongoing Regulatory Developments

The policy shift is part of broader U.S. regulatory changes following heightened interest in digital assets. The Fed previously closed its 2023 crypto bank supervision program and collaborated with the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) to issue guidance on safeguarding digital assets.

The updated policy highlights the Fed’s evolving stance on cryptocurrency participation by banks and reflects ongoing adjustments in the post-FTX regulatory environment.