The Federal Reserve has officially rescinded its restrictive 2023 guidance on “novel activities,” effectively dismantling the regulatory blockade that prevented U.S. banks from holding crypto assets or issuing stablecoins. The announcement, released late Wednesday, marks the end of the “presumption of denial” era for state-member banks.
Under the now-defunct policy (specifically SR 23-8 and the Novel Activities Supervision Program), banks were forced to undergo a rigorous, often indefinite, “advance notice” process before touching digital assets. That requirement is gone. Instead, crypto activities will now be monitored through the “normal supervisory process,” treating digital asset custody with the same risk-based approach as traditional securities handling.
The Bowman-Barr Split
The decision was not unanimous, exposing a sharp ideological rift within the central bank. Vice Chair for Supervision Michelle Bowman, who has increasingly advocated for modernization, championed the repeal.
"New technologies offer efficiencies to banks and improved products and services to bank customers. By creating a pathway for responsible, innovative products and services, the Board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective."
In contrast, Governor Michael Barr dissented. Barr argued that removing the specific guardrails would encourage “regulatory arbitrage,” allowing banks to take on outsized risks without the necessary capital buffers specifically calibrated for volatile assets.
Institutional Implications
This policy shift removes the primary structural disadvantage U.S. banks faced against crypto-native custodians like Coinbase or Anchorage Digital. Previously, the “novel activities” label acted as a soft ban; compliance officers viewed the supervisory hurdles as insurmountable. With the rescission, the path is clear for custody giants like BNY Mellon or State Street to operationalize digital asset storage without fearing an automatic supervisory veto.
The move also re-opens the door for stablecoin issuance by regulated banks, a sector that had been effectively frozen for traditional institutions since the 2023 guidance was issued. The Fed confirmed that banks will no longer need to provide advance notification for these activities, shifting the burden from permission to supervision.
For the crypto market, the immediate price impact was muted as traders digested the long-term structural change, but the removal of the “shadow ban” on banking access resolves a critical chokepoint for institutional liquidity.
