Fed Revokes 2023 Crypto Bank Guidelines, Paves New Way Forward

Policy Change: The Federal Reserve has withdrawn its 2023 guidance that restricted crypto activities for state member banks, allowing both insured and uninsured banks to apply for approval of crypto-related services on a case-by-case basis.

New Framework: The updated policy emphasizes risk management over blanket restrictions, enabling uninsured state banks to seek approval for activities previously limited, while insured banks remain subject to existing regulations.

Impact on Custodia Bank: The withdrawal of the guidance may allow Custodia Bank, which focuses on digital asset custody, to seek approval for a master account that was previously denied due to the restrictive policy.

Regulatory Perspective: The Fed's decision reflects a shift in understanding of innovative banking technologies, with officials stating that the previous guidance no longer aligns with current market conditions and risk assessments.