The fed is ending its crypto bank program – Bob explains what’s next

The US Federal Reserve has recently announced the end of its novel activities supervision program, which was specifically designed to oversee banks’ activities in crypto and fintech. For many, this sounds like a significant rollback in regulation. But for our expert, Bob, this is a signal of something far more profound: the mainstreaming of digital assets within traditional banking.

As Bob, our quiet genius, puts it: “This isn’t the Fed backing down; it’s the Fed saying they’ve learned enough to integrate crypto and fintech into their standard operating procedure. This is the moment digital assets moved from a novelty to a new normal in the eyes of the US financial system.”

Beyond a Supervision Program: Bob’s 3 Key Takeaways

The Fed’s decision is a clear indication that a new era is dawning for banking and digital assets. Bob has identified three key takeaways from this regulatory shift that every fintech leader needs to understand.

1. The End of “Regulation by Enforcement”

For years, the crypto and fintech industry has operated in a gray area, where regulatory clarity was often delivered through enforcement actions rather than clear, proactive guidance.

• Bob’s Insight: “The end of the novel activities program is a tacit acknowledgment that the Fed is no longer treating these activities as an experimental fringe. This shift moves us closer to a more predictable regulatory environment, where guidance will be integrated into the standard supervisory process. It’s a sign of maturity for the entire ecosystem.”

2. A New Era of Bank-Fintech Partnerships

The previous supervision program created a degree of uncertainty for traditional banks, making them cautious about partnering with fintechs and crypto firms. With this oversight now integrated into a standard framework, the path forward is clearer.

• Bob’s Insight: “This move could be the catalyst for a new wave of bank-fintech partnerships. Banks now have a clearer roadmap for engaging with digital assets, which could lead to a significant increase in collaboration. Fintechs with strong compliance and risk management will be perfectly positioned to partner with traditional institutions.”

3. The Focus Shifts to Risk Management

While the supervision program is ending, the risk has not gone away. The Fed is not relaxing its standards; it is simply applying them in a more standardized way.

• Bob’s Insight: “The key message here is that the onus is now on the banks themselves to demonstrate robust risk management for their digital asset activities. This includes everything from cybersecurity and illicit finance to consumer protection. This is a moment to double down on building a strong, internal risk and compliance framework, because the supervision is now standard practice, not a special program.”

The Fed’s decision is not a step backward for regulation, but a step forward for the mainstreaming of digital assets. Bob’s message to fintech leaders is clear: “The door to the US financial system is now more open than ever before. But to walk through it, you must prove that your technology and risk management are not just innovative—they are sound, resilient, and ready for prime time.

The Hidden Implications

The end of a separate supervision program is more than a simple administrative change. It signals a shift from a ‘sandbox’ approach to full-scale regulatory integration. When a regulator creates a special program for a new technology, it’s often a way to learn and observe without committing to a full framework. The Fed’s decision tells us they’ve completed their observation and are now confident in their ability to apply existing, robust banking frameworks—such as the Bank Secrecy Act (BSA) and a host of other consumer protection laws—to digital assets.

This move has profound implications for a number of areas:

The Rise of Bank-as-a-Service (BaaS) and Embedded Finance: The BaaS model, where traditional banks provide the underlying infrastructure for fintechs to offer financial services, is now on more stable footing. Banks, no longer fearing a separate, unpredictable supervisory regime, may be more willing to lend their charters to innovative fintechs. This will accelerate the growth of embedded finance, where financial services are seamlessly integrated into non-financial platforms, from e-commerce sites to social media apps.

A New Talent Race: With regulatory oversight becoming standard, there will be a new demand for talent that understands both the technical intricacies of digital assets and the complex compliance frameworks of traditional banking. Fintechs and banks alike will be looking to hire a new generation of professionals who can build bridges between these two worlds.

The Consolidation of the Market: Small, unregulated crypto and fintech firms may find it more difficult to operate as the regulatory bar for entry into the mainstream financial system is now clearly defined and high. This could lead to a consolidation of the market, where firms with robust compliance and risk management systems acquire smaller, less-equipped rivals.

Beyond the Fed

The Fed’s decision is not happening in a vacuum. It mirrors a global trend where regulators are moving from a reactive to a proactive stance on digital assets. In the UK, the Financial Conduct Authority (FCA) has been increasingly clear about its expectations for crypto firms, and the EU’s Markets in Crypto-Assets (MiCA) regulation is a landmark example of a comprehensive framework designed to bring digital assets into the regulatory fold.

Bob believes this convergence of regulatory approaches is a sign of a more mature ecosystem. “Regulators are starting to sing from the same hymn sheet,” he says. “This is good news for the industry in the long run. It reduces regulatory arbitrage and provides a clearer path for global players to scale their operations.”

What Fintech Leaders Must Do Now

With the Fed’s decision as a catalyst, Bob has a checklist for every fintech leader and professional who wants to succeed in this new era.

• Review Your Risk Framework: Don’t assume that the end of a special program means less scrutiny. Re-evaluate your risk management framework to ensure it is robust enough to stand up to standard, rigorous bank-level supervision.
• Invest in Tech and Talent: This is a moment to double down on your investment in compliance technology (RegTech) and talent. The firms that can automate monitoring, reporting, and risk management will be best positioned to thrive.
• Engage with Regulators: Don’t wait for the Fed or any other regulator to come to you. Engage proactively, share your insights, and demonstrate your commitment to compliance and responsible innovation.
• Prioritize Consumer Protection: The Fed’s standard oversight includes a strong focus on consumer protection. Ensure your products, services, and marketing are designed to be transparent, fair, and secure for the end-user.
• Think Long-Term: The Fed’s decision is a clear signal that the digital asset revolution is a long-term play. Build your firm’s strategy around sustainable growth, strong governance, and a commitment to becoming a foundational part of the financial system, not just a disruptive force on the periphery.

Bob’s message is clear: The door is now open, but only for those who are truly ready.