• The Fed allows banks to serve crypto clients if they follow strict financial and consumer protection standards.

  • Removal of reputational risk lets banks offer crypto services without fear of vague regulatory actions.

  • Banks must still meet legal credit and liquidity rules before engaging in crypto related activities.

The Federal Reserve has confirmed that U.S. banks can offer services to cryptocurrency firms if they follow proper safeguards. This announcement came during the Fed Chair’s testimony to the House Financial Services Committee on June 24. The central bank also removed a major regulatory barrier affecting crypto access to traditional banking.

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On June 23, the Fed eliminated “reputational risk” from its bank supervision manual. This change means banks will no longer face subjective judgments when dealing with crypto clients. Regulators will now focus on objective financial risks instead. This aligns the Fed’s policy with those of the FDIC and the OCC, which made similar changes earlier this year.

Policy Shift Supports Crypto Integration

The updated approach signals a coordinated regulatory stance among key U.S. banking agencies. The Fed’s move allows banks to decide whether to engage with crypto clients based on clear risk factors. This policy also prevents examiners from blocking legal crypto activities under vague reputational concerns.

Under the new guidance, Fed examiners will receive updated training. This ensures a consistent application of the rules across all supervised banks. They will also work closely with other agencies to maintain a uniform oversight system. These changes are expected to boost confidence among institutions considering crypto-related services.

Banks Set to Broaden Crypto Offerings

Banks are now expected to expand into services such as crypto custody, payments, and settlement. The regulatory clarity opens new possibilities for financial institutions to support digital asset markets. Firms can now build products without fear of regulatory pushback over reputation-based concerns.

Industry players had long criticized reputational risk as a vague and restrictive standard. The recent update removes that obstacle and enables lawful innovation in the sector. While the Fed remains cautious, it supports responsible crypto activities if banks maintain strong controls.

Fed Maintains Focus on Risk Controls

The Fed emphasized that banks must still meet strict standards on legal, credit, and liquidity risks. Regulators have not released a timeline for further guidance. However, they continue to stress the need for careful management of all financial exposures.

Alongside crypto policy, the Fed also addressed broader economic factors. Inflation remains above the 2% target. The Fed has not ruled out rate cuts later in the year. However, officials admit that market conditions remain uncertain, especially due to policy shifts such as tariffs. The Fed’s stance confirms that banks can build crypto partnerships, but they must uphold consumer protection and financial stability.