The Federal Reserve, alongside the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., has withdrawn previous directives requiring banks to seek approval from regulators for engaging in cryptocurrency activities. The move aims to promote innovation within the banking industry.

With this decision, all three regulatory bodies have rescinded their earlier guidance, shifting the responsibility of handling crypto matters within banks to their management and compliance teams. As a result, the banking sector is now anticipating new legislation from Congress to establish clear guidelines for operating in the digital assets market in the United States.

In a statement released on Thursday, the Fed emphasized that these changes are made to adapt to evolving risks and foster innovation while supervising its state member banks. By revoking four pieces of crypto guidance issued between 2022 and 2023, the Fed will now oversee banks' cryptocurrency activities through regular supervisory procedures rather than requiring prior approvals.

This regulatory shift signifies a significant step towards modernizing banking practices and adapting to emerging trends in digital finance.

Fed Joins OCC, FDIC in Withdrawing Crypto Warnings for U.S. Banks

Like the other U.S. bank agencies, the Fed has swept the decks of previous directives to bankers that they get sign-offs from the regulator for crypto activity.

• The Federal Reserve has completed the trio of U.S. banking agencies that have now eliminated the previous crypto guidance they issued to bankers.
• The Fed said it made the move, in part, to "support innovation."

The Federal Reserve has joined its fellow U.S. banking regulators in deleting its crypto guidance of previous years, including notices that banks should get pre-approvals before they get involved in crypto activity.

Now, all three agencies — including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. — have joined in reversing those previous policies, leaving crypto matters at banks in the hands of their managers and compliance executives. In the absence of guidance, the banking industry awaits new laws from Congress to define how the digital assets industry should operate in the U.S.

"These actions ensure the Board's expectations remain aligned with evolving risks and further support innovation in the banking system," the Fed said in the Thursday statement announcing the change.

Banking supervision of its state member banks is one of the multiple roles performed by the Fed, which is better known for its monetary policy work. The agency's move on Thursday will specifically remove four pieces of crypto guidance the board signed onto in 2022 and 2023, highlighting risks to banks posed by the sector.

Fed officials "will instead monitor banks' crypto-asset activities through the normal supervisory process."

Read More: FDIC Reverses U.S. Crypto Banking Policy That Demanded Prior Approvals