The Fed’s program was designed to closely monitor bank activities involving crypto-assets, blockchain technology, fintech partnerships, and banks providing services to crypto-linked entities.
Strategy’s (MSTR) Michael Saylor said on Friday that the Federal Reserve’s ending its ‘Novel Activities Supervision Program’ marked a turning point for Bitcoin (BTC)-friendly banking regulation.
“The road is now clear for Bitcoin and banking,” MSTR’s co-founder and executive chairman said in a post on X. The Fed’s now-scrapped program was designed to closely monitor bank activities involving crypto-assets, blockchain technology, fintech partnerships, and banks providing services to crypto-linked entities.
Strategy’s stock fell more than 2.5% in midday trade with retail sentiment on Stocktwits trending in ‘neutral’ territory amid ‘high’ levels of chatter.
“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 Federal Reserve announced. “As a result, the Board is integrating that knowledge and the supervision of those activities back into the standard supervisory process and is rescinding its 2023 supervisory letter creating the program.”
Bitcoin’s price pared some of its losses in midday trade, still down 0.4% in the last 24 hours, trading at around $117,300. On Stocktwits, retail sentiment around the apex cryptocurrency remained in the ‘neutral’ zone.
While the Fed’s 2023 program did not automatically prohibit banks from participating in crypto or stablecoin activities, it did imply that they would face added scrutiny and compliance hurdles. Moreover, the supervisory framework was risk-based, which meant banks with heavier crypto involvement would receive more intense oversight.
At the time, the Fed cited technology risks, lack of legal clarity, consumer protection, financial stability, and anti-money laundering concerns for issuing the new supervisory approach. There was also an accompanying supervisory letter, which outlined a process requiring banks to obtain a nonobjection from the Fed before engaging with stablecoins.
Earlier this year, the Fed lifted the requirement for pre-approval before banks could engage in crypto or stablecoin activities. Today’s announcement marks the end of both the supervisory schemes announced in 2023.
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