Fed will sunset novel activities supervision program

The Federal Reserve announced it will sunset its novel activities supervision program and return to monitoring banks' novel activities through the normal supervisory process.

Details: The Fed said:

• Since it started its program to supervise certain crypto and fintech activities in banks, the Fed has strengthened its understanding of those activities, related risks, and bank risk management practices.

• It is integrating that knowledge and the supervision of those activities back into the standard supervisory process and rescinding its 2023 supervisory letter creating the program.

Background: The Fed in August 2023 released additional information on its program to supervise novel activities in the banks it oversees, including stablecoin activity. In January 2023, a Fed policy statement said crypto activities—such as issuing stablecoins on decentralized networks—are “highly likely to be inconsistent with safe and sound banking practices.”

ICBA View: In a January 2023 national news release, ICBA said the Fed’s actions appropriately safeguard the banking system from the risks posed by institutions with novel charters and from the crypto sector, reflecting ICBA concerns laid out in comments on accessing Fed master accounts.