Fed Ends Special Oversight Program for Banks in Crypto: One Year Was Enough to “Understand” the Risk

The U.S. Federal Reserve announced on Friday that it is ending its Novel Activities Supervision Program – a special oversight framework launched in 2023 to closely monitor banks entering the world of cryptocurrencies, blockchain, and technology-driven partnerships. According to the Fed, this standalone framework is no longer necessary. The central bank says it has “enhanced its understanding” of the risks and opportunities of these activities, and supervision will now be integrated back into standard processes.

One Year of Monitoring Banks’ Crypto Projects Was Enough The program was created last year to oversee banks’ so-called “novel activities” – ranging from crypto custody and loans backed by digital assets, to stablecoins, tokenized dollars, and partnerships with fintech companies offering services via APIs. Its main purpose was not to prohibit but to closely assess risks. For example, if a bank issued a stablecoin, held client cryptocurrencies, or offered services primarily to crypto companies, it was placed under heightened scrutiny. In a 2023 letter, the Fed warned that new technologies could benefit the economy but also cause rapid shifts in the financial system and expose legal or security gaps. The program was designed to help regulators keep up with the fast-moving market – and according to the Fed, a single year was enough.

Crypto Back Under “Normal Oversight” Ending the program does not mean the Fed has become pro-crypto. Oversight of banks active in the crypto space will continue, just without the special label. As stated in the official announcement: “The Board is integrating this knowledge and oversight of these activities back into the standard supervisory process.”

This means banks working with crypto companies, issuing tokenized assets, or experimenting with blockchain will remain under close watch – just not within a standalone program.

Technology Partnerships and Tokenization Still in Focus During the program, the Fed also monitored models in which fintech firms ran client-facing services while banks provided backend infrastructure via APIs. These arrangements became popular among institutions serving crypto customers without having to develop full systems in-house. Attention was also given to tokenized securities, digital dollars, and other tools based on distributed ledger technology, particularly if they had the potential to affect the stability of the wider financial system. By ending the program, this oversight doesn’t disappear – only the special badge that gave it an exceptional status does.

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