Us Fed Pulls Guidance Blocking Its Banks From Engaging With Crypto

The Federal Reserve says it has withdrawn its old guidance around crypto as it was outdated, and its understanding has evolved.

The US Federal Reserve has withdrawn a 2023 guidance that limited how Fed-supervised banks, including uninsured ones, engaged with crypto, as US regulators continue to pivot positively toward digital assets.

The 2023 guidance required uninsured banks to follow the same rules as federally insured institutions, based on the principle that similar activities pose similar risks and should be subject to identical regulation.

This prevented uninsured banks from engaging in activities that weren’t permitted for national banks, like crypto services, which automatically disqualified Fed membership because the institution’s primary activities weren’t allowed.

The Fed said a key reason for withdrawing the guidance was that it was outdated and “the financial system and the Board’s understanding of innovative products and services have evolved.”

“As a result, the 2023 policy statement is no longer appropriate and has been withdrawn,” it said.

Caitlin Long, the CEO of the crypto‑focused Custodia Bank, applauded the move in an X post on Wednesday, explaining the 2023 guidance was why her institution’s application for a master account was previously denied.

A master account with the Fed enables a financial institution to hold balances directly with the US central bank and access its core payment systems, allowing for payment settlement in central bank money rather than relying on another bank as an intermediary.

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“The Fed broke the law by citing this very guidance in the Custodia denial, even tho the guidance hadn’t become official yet, that didn’t happen until Feb 2023,” Long said.

Source: CoinTelegraph