TLDR
- The Federal Reserve withdraws 2023 crypto restrictions, allowing banks to explore innovative activities.
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The new policy creates a clearer path for banks to engage with digital assets like crypto custody.
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Both insured and uninsured state member banks can now apply to engage in crypto services.
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The shift reflects a more innovation-friendly approach to digital assets and blockchain.
The Federal Reserve has officially withdrawn its restrictive 2023 policy that limited certain banks from engaging in innovative crypto-related activities. This marks a shift toward a more flexible and open approach to digital asset integration in the U.S. banking sector. On December 17, 2025, the Fed Board released a statement acknowledging the evolving understanding of innovative products and services in the financial system.
The 2023 policy previously imposed strong restrictions, particularly against state member banks engaging in novel crypto services that weren’t explicitly allowed for national banks. This had effectively barred smaller, state-chartered banks from entering the crypto space, especially in areas like crypto custody and stablecoin issuance.
Federal Reserve New Policy Expands Bank Engagement with Digital Assets
The updated policy now allows both insured and uninsured state member banks to apply for permission to engage in activities not traditionally permissible under the previous framework. Insured banks remain subject to limits under the Federal Deposit Insurance Act, but uninsured state banks have the opportunity to seek approval for activities that were previously restricted.
This change paves the way for banks to start engaging more actively with the digital asset sector, including services such as cryptocurrency custody, tokenization, blockchain settlement tools, and stablecoin integration. The Federal Reserve emphasized that banks engaging in these activities must demonstrate proper risk management practices and adhere to regulatory expectations.
In practice, this policy change offers banks the opportunity to innovate in the digital space while still maintaining the safety and soundness of the financial system. The shift in the Fed’s approach signifies a departure from a restrictive stance to one that encourages responsible experimentation with new technologies.
Custodia Bank and Crypto-Focused Institutions Benefit from Policy Change
One of the notable institutions affected by the 2023 policy was Custodia Bank, a Wyoming-chartered special purpose depository institution. Custodia, which focuses on providing compliant banking services for digital assets, was previously blocked from accessing a Federal Reserve Master Account due to the 2023 restrictions.
Now, with the Federal Reserve’s new guidance, Custodia Bank and other similar crypto-focused institutions could have the opportunity to apply for permission to engage in activities previously off-limits.
The new policy gives these banks a clearer path to integrate digital assets and blockchain technologies into their services. The Fed’s revised stance signals a willingness to allow crypto-focused institutions to operate within a regulated environment that balances innovation with risk management.
A Step Toward a More Innovation-Friendly Crypto Framework
The Federal Reserve’s withdrawal of the 2023 policy comes amid growing support for the digital asset sector from various U.S. regulators, including the Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC). These regulatory bodies have been gradually advancing frameworks that enable the integration of blockchain and crypto services into mainstream finance.
The Fed’s decision to ease restrictions also aligns with broader efforts to provide clarity and foster responsible innovation in the U.S. financial system.
By allowing banks to apply for permission to engage in novel crypto activities, the Federal Reserve has created a more structured path for banks to participate in the growing digital asset market while ensuring they meet rigorous supervisory standards.
