The Federal Reserve Cancels its Special Cryptocurrency Regulatory Program: A New Opportunity for Change for the Crypto Industry

On August 16, 2025, the Federal Reserve announced the official cancellation of the "Novel Activities Supervision Program" for banks' cryptocurrency and fintech activities, bringing these activities under the regular banking regulatory framework. This move marks a significant shift in US cryptocurrency regulatory policy and sends a positive signal for the industry's development.

The special regulatory program began in 2023 following the collapse of three banks with close ties to the crypto industry: Silicon Valley Bank, Silvergate Bank, and Signature Bank, which triggered market volatility. Concerned about the risks posed by emerging technologies, the Federal Reserve launched the special program, requiring banks to obtain regulatory approval before conducting crypto business and strengthen risk management. However, as regulators' understanding of crypto risks deepened and the policy environment shifted, the Federal Reserve decided to terminate the program and shift supervision through the regular regulatory framework.

The core rationale behind this adjustment lies in optimizing regulatory thinking. The Federal Reserve Board of Governors stated in a statement that after two years of practice, they have fully understood the relevant risk characteristics and banks' risk management capabilities, eliminating the need for a separate regulatory program. A deeper reason lies in a shift in policy direction: the Trump administration has embraced cryptocurrencies since taking office. In March, the first White House Cryptocurrency Summit brought together industry leaders and senior regulators to promote loosening regulations. In April, the Federal Reserve withdrew its prior approval requirement for crypto businesses. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) also relaxed restrictions, allowing banks to independently provide crypto services within existing frameworks.

The elimination of the special regulatory program will significantly simplify the compliance process for banks involved in crypto businesses and lower the barrier to entry. Banks will have greater flexibility in offering services such as cryptocurrency custody and stablecoin reserves, accelerating the integration of traditional finance and crypto. However, regulation is not completely withdrawn: core principles such as anti-money laundering and consumer protection remain emphasized, and regular oversight will continue to monitor risks. This means the industry will have to strike a balance between innovation and compliance to avoid a repeat of the 2023 crisis.

The market has responded positively to the policy adjustments. Bitcoin prices have risen in the short term, boosting institutional investor confidence. Crypto companies like Coinbase are looking forward to a clearer regulatory environment to promote compliant product innovation. At the same time, regulatory consolidation may catalyze new trends: large institutions will dominate the market, leaving small and medium-sized platforms facing elimination; decentralized finance, such as DeFi, will need to explore development paths within a compliant framework; and the stablecoin sector may experience a boom, becoming a bridge between traditional finance and the crypto world.

The Federal Reserve's cancellation of its special regulatory program reflects the evolution of cryptocurrencies from "fringe assets" to "mainstream financial instruments." Policy easing has injected vitality into the industry, but risk management remains a top priority. Moving forward, regulators will face a constant balancing act between encouraging innovation and preventing systemic risks. The globalization and institutionalization of cryptocurrencies is irreversible. This transformation will not only impact the US market but will also reshape the global cryptocurrency ecosystem.