The U.S. Federal Reserve has withdrawn a 2023 policy statement that effectively barred uninsured state-chartered banks from becoming Fed members and limited their ability to engage in crypto-related activities, replacing it with a new framework aimed at allowing “responsible innovation” across the banking system.
What Happened
The updated policy, released Wednesday, establishes a pathway for both insured and uninsured Fed-supervised state member banks to participate in certain innovative services, a notable reversal from the Fed’s earlier position, which aligned uninsured banks’ permissible activities with those of federally insured institutions.
“New technologies offer efficiencies to banks and improved products and services to bank customers,” Vice Chair for Supervision Michelle Bowman said, adding that the revised policy aims to ensure banks remain “safe and sound while also modern, efficient, and effective.”
What The Fed Changed
The 2023 policy statement had been widely interpreted as restricting uninsured banks, including crypto-focused state-chartered institutions such as Wyoming’s Special Purpose Depository Institutions (SPDIs), from obtaining Federal Reserve master accounts, engaging in digital asset custody or settlement activities and participating in crypto-native payment systems.
The Fed’s updated statement explicitly withdraws that 2023 guidance, acknowledging that “the financial system and the Board's understanding of innovative products and services have evolved,” making the previous approach “no longer appropriate.”
New Pathway For Innovation
The new policy clarifies that the Fed will now allow both insured and uninsured state member banks it supervises to engage in certain innovative activities, provided they meet safety, soundness, and risk-management standards.
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While the announcement does not expand permissible activities beyond what federal law allows, it signals a less restrictive posture toward crypto-linked banking services, after years of tension between digital asset firms and federal banking regulators.
Years Of Regulatory Friction
The withdrawal marks a significant development in a long-running dispute between U.S. crypto-banking startups and federal regulators:
In 2022–2023, the Federal Reserve, FDIC, and OCC issued multiple warnings about digital asset risks in the banking system, urging institutions to avoid “unsafe or unsound” crypto activities.
The 2023 Fed policy statement reinforced that stance by limiting what uninsured state banks could do, effectively blocking crypto-native banks from joining the Federal Reserve system.
Wyoming officials and several crypto banks have since argued the Fed’s position constrained competition and stifled innovation.
The new policy suggests a shift away from blanket restrictions and toward supervisory oversight that evaluates innovative activities on a risk-based basis.
What Next?
The Fed provided no detailed list of approved activities, indicating that banks seeking to engage in crypto, tokenization, or other new technologies will be assessed individually.
Regulators emphasized that safety and soundness expectations remain unchanged.
The revised guidance is likely to be closely watched by digital-asset custodians, tokenization platforms, and banks seeking direct access to Fed payment rails without FDIC insurance.
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