Fed scraps oversight program for banks’ crypto, fintech activities

• The Federal Reserve discontinued its special supervision program for banks involved with crypto and fintech.
• Oversight of crypto and fintech activities will now be incorporated into the Feds regular supervision framework.

The Federal Reserve said Friday that it was ending its Novel Activities Supervision Program, which was created to strengthen oversight of banks engaged in emerging, technology-driven activities, especially crypto assets, distributed ledger technology (DLT), and complex fintech partnerships.

The central bank is now moving oversight of those activities back into its standard supervisory it has built up sufficient understanding of these activities, their associated risks, and how banks manage them.

The program, launched in 2023, aimed to ensure that risks from emerging, technology-driven activities were identified and managed appropriately, while still allowing beneficial technologies to develop.

The Fed said novel activities could create legal and supervisory questions, werent always covered by existing oversight and could pose broader financial stability concerns.

The program would a range of activities, including stablecoin issuance, tokenized securities, API-driven partnerships with non-banks, and banking exposure to crypto clients. Under the plan, Fed examiners would have worked within existing supervisory teams to flag and monitor “novel” scrutiny to a banks level of involvement.

The original program was designed to leverage external expertise from academia and industry to inform future supervisory to balance innovation with safety and soundness considerations.