Federal Reserve Ends Oversight Program for Cryptocurrency and Distributed Ledger Technology

According to a report by Jinse Finance, on Friday, the U.S. Federal Reserve (commonly known as the "Fed") shut down its "Novel Activities Supervision Program," which was established in 2023. When the program was launched, regulators stated that its purpose was "to ensure that risks associated with innovation are properly addressed." The program primarily applied to distributed ledger technology (DLT), crypto assets, banks supporting the cryptocurrency sector, and technology-driven partnerships between banks and non-bank institutions. The Fed indicated that it now has a more comprehensive understanding of the related risks, so these business activities can be incorporated into routine supervisory processes. In April of this year, the Fed also rescinded several supervisory letters related to cryptocurrencies and distributed ledger technology, including one that required a "non-objection letter" before such business activities could commence. The program's restrictive regulatory approach had a tangible impact on blockchain banking initiatives. A Freedom of Information Act request submitted to the Federal Deposit Insurance Corporation (FDIC) revealed that the program hindered the launch of the "USDF Consortium"—an alliance aimed at facilitating interbank payments among community banks—which ultimately abandoned its plans due to these obstacles. The USDF Consortium is not the only entity with such ambitions (to promote blockchain-based interbank payments).