The Federal Reserve announced the closure of the "Novel Activities Supervision Program" established in 2023, integrating regulatory functions related to crypto and fintech banking back into standard supervisory processes.

On Friday local time, the Federal Reserve announced that it had shut down its "Novel Activities Supervision Program," established in 2023, which was partially intended to strengthen oversight of cryptocurrency activities in the banking sector.

This move is the latest in a series of recent shifts by U.S. regulators toward the crypto industry.

In a brief statement, the Federal Reserve Board said: "Since the Board initiated a supervisory program for certain crypto-asset and fintech activities in banking organizations, the Board has deepened its understanding of these activities, their associated risks, and banks’ risk management practices. As a result, the Board is integrating this knowledge and oversight of these activities back into the standard supervisory process and rescinding the 2023 supervisory letter that created the program."

This short-lived program was introduced against the backdrop of the 2023 U.S. banking crisis. Three U.S. banks closely tied to the crypto industry—Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank—collapsed in succession. The Federal Reserve believed it needed to pay closer attention to the risks that innovative and insufficiently tested technologies might pose to the banking system.

Of course, the latest requirements only simplify the compliance process for banks engaging in crypto activities, while core regulatory principles such as anti-money laundering and consumer protection remain unchanged. Before this, the crypto industry had long accused U.S. regulators of deliberately "blocking" their connections with the banking sector.

This year, with the pro-crypto Donald Trump assuming the presidency, the regulatory landscape has shifted abruptly.

In April, the Federal Reserve withdrew guidance requiring banks to obtain regulatory approval before launching new crypto activities. The other two U.S. federal banking regulators—the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC)—also took similar steps, allowing banks to decide for themselves whether to engage in crypto activities under existing risk management requirements.

Then, in July, the three regulators issued a joint statement providing guidance on how banks could offer cryptocurrency custody services. The guidance described custody as holding digital assets on behalf of customers while emphasizing that it did not create new regulatory requirements.