Michaela
Summary: Why is the Federal Reserve ending its specialized oversight program for crypto and fintech activities?
The Fed is retiring the program to return to standard supervisory procedures while continuing to monitor banks’ emerging financial activities. The move follows political pressure and criticism from pro-crypto lawmakers, who argued the program contributed to “debanking” digital asset companies. Officials say the initiative has already improved their understanding of the risks associated with crypto and fintech operations.
The U.S. Federal Reserve has announced it will retire its specialized oversight program for emerging financial activities, reverting to standard supervisory procedures for banks’ involvement in crypto, fintech, and other innovative services.
On August 15, the Federal Reserve confirmed the rescission of its 2023 supervisory letter that established the specialized oversight program. The initiative had been designed to enhance supervision of banks engaging with cryptocurrencies, stablecoins, and other emerging financial technologies.
“Since the Board started its program to supervise certain crypto and fintech activities in banks, the Board has strengthened its understanding of those activities, related risks, and bank risk management practices,” the Reserve wrote in an official statement.
The decision follows mounting political pressure and criticism from pro-crypto lawmakers, who have portrayed the program as part of a broader “debanking” effort targeting digital asset companies, labeling it “Operation Chokepoint 2.0”, an alleged campaign to restrict banking access for politically disfavored industries.
Operation Choke Point 2.0 was a regulatory effort in which federal agencies sought to influence banks’ relationships with high-risk or emerging industries, including crypto, through guidance and informal oversight.
The initiative aimed to tighten scrutiny on financial services deemed risky, sparking debate over the balance between consumer protection and stifling innovation. Its legacy has prompted lawmakers and industry stakeholders to push for clearer rules and greater transparency in how banks engage with emerging financial technologies.
Senator Cynthia Lummis, a prominent advocate for cryptocurrency, commented on the recent development in a post on X. “Big win for putting an end to Operation Chokepoint 2.0,” Senator Lummis wrote. “The Fed announced it’s killing the targeted supervision of digital asset banking activities. There’s still more to do, but this is real progress toward a level playing field for crypto,” she added.
The shift marks a significant moment for the broader financial sector, as regulators and industry leaders watch closely to see how standard supervisory frameworks will adapt to emerging technologies. Analysts suggest the move could set a precedent for how innovative financial services are monitored in the future, balancing oversight with the need to foster growth and competitiveness.
Read More
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- Crypto Rules Relaxed: Fed Clears Banks to Enter the Game
- Jerome Powell Hints Easing Crypto Restrictions for Banks
Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
