The U.S. Federal Reserve has announced the closure of the Novel Activities Supervision Program, a dedicated unit established in 2023 to monitor banks’ engagement with cryptocurrency and fintech services. The central bank cited strengthened internal expertise and the maturation of digital asset oversight practices as the primary reasons for folding the specialized team back into the standard supervisory framework.
Launched amid concerns about the rapid growth of crypto-related banking risks, the program aimed to concentrate resources on evaluating emerging threats and guiding banks on best practices. In its two years of operation, the unit engaged with multiple financial institutions to assess risk management protocols, evaluate custodial arrangements, and advise on compliance measures. During that period, regulators identified key vulnerabilities in cyber defenses and asset custody, leading to recommendations on enhanced security controls and capital requirements.
Effective immediately, oversight of crypto and fintech activities will revert to the Fed’s broader supervisory staff. Bank examiners will integrate digital asset considerations into routine reviews, leveraging the expertise developed by the now-disbanded program. Supporters of the move argue that embedding crypto oversight within existing processes will reduce complexity, improve consistency, and enable a more holistic view of banks’ risk profiles. Opponents warn that diffusing responsibility may weaken focus on novel technologies and delay action on emerging threats.
Financial industry representatives responded with mixed feedback. Trade groups praised the Fed’s acknowledgment of growing in-house capabilities, but urged clear guidance on how examination procedures will address digital asset exposures. Some community advocates called for transparency on how supervisory priorities will be set and measured without a specialized unit. Meanwhile, the other federal banking regulators have maintained similar crypto policies, adding that collaborative oversight remains a key element of the U.S. approach to financial innovation.
Background: The Novel Activities Supervision Program was introduced following high-profile bank failures tied to crypto-related counterparties and the rapid expansion of digital assets within traditional finance. It operated alongside guidance issued by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, both of which recently rescinded their own crypto cautions. As the U.S. banking regulators continue to refine policy, attention now shifts to how comprehensive risk management will address decentralized finance, tokenization of assets, and the evolving nature of fiat-backed stablecoins.
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