How will the Federal Reserve’s recent decision to end its specialized cryptocurrency oversight affect the banking sector? On August 15, 2025, the Fed officially terminated the Novel Activities Supervision Program (NASP), which was established in 2023 to provide focused regulatory scrutiny over crypto and fintech activities within banks. This program’s conclusion signals a shift as cryptocurrency oversight is being integrated into the Fed’s standard bank supervision processes. By rescinding the 2023 supervisory letter that created NASP, the Fed aims to streamline regulatory procedures and reduce overlapping layers of supervision, reflecting an evolved institutional understanding of digital asset risks and bank risk management.
The decision aligns with a broader deregulatory philosophy that has gained traction, particularly consistent with the Trump administration’s agenda to lessen compliance burdens. This approach intends to foster innovation and enhance competitiveness in the U.S. digital asset markets by allowing banks greater autonomy in providing crypto-related services. In parallel, other regulators such as the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have eased prior restrictions, removing requirements for explicit supervisory approval before engaging in cryptocurrency activities. Instead, banks will now operate under existing risk-management expectations embedded within routine supervisory frameworks. This move also reflects a broader regulatory strategy change by the Fed to normalize oversight and reduce specialization in crypto supervision. The Fed concluded that it had gained sufficient knowledge from the program to confidently integrate crypto oversight into standard processes. This shift underscores the need for regulatory adaptation to keep pace with evolving financial technologies.
Industry and political responses to the Fed’s move have generally been positive, with figures like Senator Cynthia Lummis highlighting the decision as progress toward a more open regulatory environment for crypto. Experts interpret the termination of NASP as a sign of improving market conditions and as a step that may encourage traditional financial institutions to increase their crypto holdings and services. Nevertheless, calls persist among advocates for clearer and more all-encompassing regulations that would provide greater legal certainty and stability within digital asset markets.
Under the new framework, cryptocurrency activities that were once monitored under the specialized program will be subject to standard supervisory reviews, with the Fed incorporating lessons learned from NASP into its broader expertise. Banks are expected to maintain robust risk management practices without the need for separate crypto-specific approvals, thereby reducing regulatory friction and overlap. Despite this easing, the Fed remains vigilant, continuing to monitor technological and market developments within its normal supervisory remit to address emerging fintech risks prudently. This transition is based on extensive consultations with industry and regulators.
