US Fed pulls guidance blocking its banks from engaging with crypto

The US Federal Reserve has withdrawn its 2023 guidance that previously limited how Fed-supervised banks, including uninsured ones, could engage with cryptocurrency activities. The withdrawn guidance mandated that uninsured banks adhere to the same rules as federally insured institutions, based on the premise that similar activities carry similar risks requiring identical regulation. This effectively barred uninsured banks from crypto services, which could disqualify them from Fed membership. The Fed stated the guidance was withdrawn because the financial system and its understanding of innovative products have evolved since 2023, rendering the 2023 policy statement inappropriate. Caitlin Long, CEO of Custodia Bank, praised the move, noting the previous guidance was cited in her bank's denied application for a master account, which allows direct access to the Fed's core payment systems. Concurrently, the Fed issued new guidance establishing a formal pathway for both insured and uninsured state member banks to pursue innovative activities like cryptocurrencies, provided risk management expectations are met. However, the decision was not unanimous; Fed Governor Michael Barr dissented, arguing that rescinding the policy encourages regulatory arbitrage and undermines a level playing field among banks.

(Source：Cointelegraph)