US Fed withdraws 2023 crypto limits for banks, sets new approval path in 2025

In a concurrent release, the Board outlined a new process for banks to pursue innovative activities, provided they meet risk‑management expectations and obtain appropriate supervisory feedback.

The 2023 statement had required uninsured state member banks to follow the same activity limitations applied to federally insured institutions under the “same activity, same risk, same rules” approach. In practice, that alignment prevented uninsured banks from offering services not permitted for national banks, including certain crypto services, and it effectively disqualified such institutions from Federal Reserve membership where primary activities were not allowed under that framework.

Announcing the change, the Board noted the financial system and its understanding of innovative products and services had evolved since 2023, making the prior statement no longer appropriate. The withdrawal removes the blanket constraint and replaces it with a pathway under which both insured and uninsured state member banks may seek supervisory non‑objection for activities such as custody of digital assets and other crypto‑related services, subject to safety‑and‑soundness, consumer‑compliance, and anti‑money‑laundering controls.

Federal Reserve Governor Michelle W. Bowman stated the goal is to maintain a safe and sound banking sector while allowing responsible innovation. “By creating a pathway for responsible, innovative products and services, the Board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective,” she wrote.

Federal Reserve Vice Chair for Supervision Michael S. Barr dissented, citing concerns about regulatory arbitrage and unequal treatment among institutions. “This principle continues to hold true today. Therefore, I cannot agree to rescind the current policy statement and adopt a new one that would, in effect, encourage regulatory arbitrage, undermine a level playing field, and promote incentives misaligned with maintaining financial stability. I dissent,” Barr wrote.

Caitlin Long, chief executive of Custodia Bank, welcomed the move in a post on X on 17 December 2025, noting that the 2023 statement had been cited in the Federal Reserve’s earlier denial of Custodia’s master‑account application. A Federal Reserve master account allows a financial institution to hold balances directly with the central bank and access core payment rails, settling in central bank money rather than through a correspondent.

As GNcrypto reported on 10 December 2025, U.S. spot bitcoin ETFs recorded $152 million in net inflows ahead of the Federal Reserve decision, led by Fidelity’s FBTC with about $199 million while outflows at other funds narrowed the total. Ether products added roughly $178 million and Solana funds about $16.5 million. Market desks framed the flows as cautious positioning into the FOMC meeting, with attention on Chair Jerome Powell’s guidance for 2026.