The Federal Reserve will phase out its crypto-focused novel activities supervision program launched in 2023.
The change follows Trump’s executive order to end perceived unfair banking practices tied to Operation Chokepoint.
Crypto banking oversight will now be handled under the Fed’s standard supervisory process, ending targeted scrutiny.
The Federal Reserve will end its targeted oversight program for cryptocurrency-related banking activities, marking a significant regulatory change. The decision follows an executive order signed by President Donald Trump directing regulators to halt what the administration described as unfair banking practices. The move also adds to the rollback of measures linked to the previous “Operation Chokepoint” approach.
Shift Away From Targeted Crypto Supervision
In a press release, the U.S. central bank confirmed it will phase out its novel activities supervision program. The initiative, launched in 2023, was designed to monitor banks engaged in cryptocurrency and certain fintech activities. The Fed said it had gained a deeper understanding of these operations, associated risks, and how banks manage them.
With this knowledge, the Fed will now oversee cryptocurrency-related banking through its standard supervisory framework. The regulator will also rescind the supervisory letter that established the program. This action removes one of the mechanisms critics linked to Operation Chokepoint-style practices during the Biden administration.
The change follows the executive order’s requirement that agencies eliminate guidance enabling targeted restrictions against businesses or individuals based on political, religious, or other non-financial factors. The order specifically cited past cases where banks were pressured to sever relationships with cryptocurrency firms.
Related Regulatory Actions on Crypto Banking
This decision is not the first regulatory adjustment on crypto banking in recent months. In July, the Federal Reserve and other banking regulators confirmed that banks can provide custody services for cryptocurrency. They stated that existing custody rules for traditional assets also apply to digital assets.
By integrating crypto oversight into its regular supervision, the Fed aligns its approach with these earlier developments. Regulators now treat crypto custody and related activities as part of broader financial services rather than separate high-risk categories.
Industry and Political Reactions
Pro-crypto U.S. Senator Cynthia Lummis commented on the development in an X post, calling it progress toward ending Operation Chokepoint 2.0. She noted that while more work remains, removing targeted supervision is a meaningful step toward regulatory consistency.
https://twitter.com/SenLummis/status/1956405832159228067
Michael Saylor, co-founder of Strategy, also remarked on the decision. His company holds over 628,000 Bitcoin, making it the largest corporate holder of the asset. Saylor said the move clears a path for closer integration between Bitcoin and banking.
Journalist Eleanor Terrett cited legal sources describing the Fed’s program as a key driver of Operation Chokepoint 2.0. She noted that while the central bank has not reversed all guidance from the Biden era, ending this program removes another element of targeted oversight.
