The Federal Reserve’s formal withdrawal of its 2023 policy—which previously restricted banks from engaging in Bitcoin and crypto-related activities—marks a fundamental "U-turn" in U.S. financial regulatory history. This move signifies a transition from a period of "exclusionary defense" to a new era of "integrated supervision."
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A Paradigm Shift in Regulatory Philosophy: From "Administrative Obstruction" to "Risk Neutrality"
The 2023 policy (notably SR 23-8) was built on a foundation of "presumptive guilt." It characterized crypto-related activities as inherently unsafe and unsound, effectively creating an administrative barrier—such as the "non-objection" requirement—to block banks from entering the space.
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The Transformation: The Fed has now shifted toward "risk-based supervision." The new framework no longer labels specific technologies or assets (like Bitcoin) as inherently illicit. Instead, it returns decision-making power to the banks' internal compliance and risk management departments.
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The Underlying Logic: Regulators have realized that administrative bans cannot halt technological evolution. Rather than pushing crypto activities into the "shadow banking" sector, the Fed is choosing to bring them under its direct oversight (the "regulatory perimeter"), applying standard capital adequacy and liquidity requirements.
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Infrastructure Upgrades for Traditional Banks: The Era of RWA and Tokenization
The primary beneficiaries of this reversal are not crypto exchanges, but traditional banking institutions.
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Ending "Second-Class" Treatment: The 2023 policy penalized state-chartered banks (such as Wyoming’s crypto-friendly SPDIs) by denying them access to Fed Master Accounts. The new policy removes this discrimination, providing a clear path for these institutions to integrate into the national payment system provided they meet safety standards.
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The Explosion of Real-World Assets (RWA): By explicitly supporting "responsible innovation," the Fed has paved the way for banks to engage in Asset Tokenization (e.g., tokenized Treasury bonds and certificates of deposit). In the future, banks will evolve from being mere custodians of fiat into primary issuers of on-chain liquidity.
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The "Banking" of Stablecoins: With these restrictions lifted, banks are now incentivized to issue regulated "Dollar Tokens." This poses a direct challenge to the current dominance of non-bank stablecoin issuers like Tether (USDT) and Circle (USDC).
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Core Drivers: Political Climate and Legislative Pressure
This policy pivot is not an isolated event but a reflection of broader U.S. financial policy changes in 2025:
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The Momentum of the "GENIUS Act": The passage of the GENIUS Act (Stablecoin National Innovation and Unified Standards Act) in July 2025 provided a federal legal framework for stablecoins. The Fed’s withdrawal of its old policy was a necessary "legal alignment," as its previous administrative directives had become inconsistent with new federal law.
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Global Financial Competition: With the implementation of the EU’s MiCA regulations and the rise of digital asset hubs in Asia, the Fed recognized that continued "choke point" tactics would cause the U.S. to lose its leadership in the next generation of digital payment protocols.
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Future Forecasts: The New "Bank-Crypto" Ecosystem
The Fed's withdrawal of restrictions does not mean "deregulation"; rather, it enters a phase of "high-compliance integration."
Conclusion
The Federal Reserve has sent a definitive signal: Cryptocurrency is no longer viewed as an "alien pathogen" to the financial system, but as a "new financial instrument." This shift from "containment" to "channeling" suggests that the U.S. is attempting to absorb the efficiency of decentralized finance into the framework of traditional centralized regulation.