Federal Reserve Ends Crypto Supervision Program, Returns to Normal Monitoring Procedures

The Federal Reserve Board (the Fed) recently announced the discontinuation of its special supervision program related to crypto assets and distributed ledger technology. Constituted in 2023, the program aimed to monitor certain novel activities within the crypto space.

A Change in Supervision Strategy

The Federal Reserve stated in a recent communication that it’s planning to retire the distinctive program that was initiated in August 2023. Moving forward, the novel activities related to the banking sphere will be supervised again through the standard oversight process. The 2023 program was focused on risk and incorporated the supervision of banks involved in offering deposits, payments, and loans to crypto-centric bodies and financial technology firms.

An Integrated Approach

As per the Fed, the launch of the program allowed the Board to improve its understanding of these trailblazing activities, the risks they pose, and the risk management practices employed by banks. The board has now decided to integrate this gained knowledge and to supervise related activities within its standard oversight process. The Federal Reserve is also revoking the 2023 supervisory letter that served as the foundation for this program.

Regulatory Shift Under the Trump Administration

The decision doesn’t necessarily imply that the Federal Reserve is reducing its oversight of banks dealing with crypto-based entities. However, under the Trump administration, U.S government agencies have largely displayed a more lenient attitude towards the regulation and management of digital assets. Earlier this year, the Securities and Exchange Commission discontinued several investigations and enforcement actions against crypto companies. Moreover, statements from the leadership at the Treasury hinted that the department is likely to support the White House’s policy of establishing a national crypto reserve.

Trump and The Fed

President Donald Trump has actively questioned the Federal Reserve’s independence in setting federal interest rates, often personally criticizing Jerome Powell, whom he nominated as the Chair in 2017. Powell’s term as Chair is scheduled to conclude in May 2026, but he will continue to serve as a Fed governor until January 2028. On the other hand, Adriana Kugler, a member of the Federal Reserve’s board of governors and the Federal Open Market Committee, stepped down from her position on August 8th. President Trump has nominated the Council of Economic Advisors Chair Stephen Miran to fill the role until January, beyond which a permanent successor is expected to be chosen. In conclusion, the Federal Reserve’s decision represents a form of maturation in the crypto supervision sector. While it’s a notable regulatory development, it doesn’t necessarily suggest a reduction in scrutiny, but rather an integration of expertise and knowledge into the mainstream supervisory processes.