Why the Fed Reversed Course
According to the Federal Reserve Board, the financial system has evolved enough since 2023 to make the earlier guidance outdated. That rule had effectively forced state member banks to follow the most conservative interpretations used by other federal regulators, creating uncertainty and friction around crypto, stablecoins, and novel payment tools.
Fed Vice Chair for Supervision Michelle Bowman said the central bank’s understanding has matured alongside market developments.
@federalreserve withdraws 2023 policy statement and issues new policy statement regarding the treatment of certain Board-supervised banks that facilitates responsible innovation: https://t.co/5s1I9LO9EF
— Federal Reserve (@federalreserve) December 17, 2025
@federalreserve withdraws 2023 policy statement and issues new policy statement regarding the treatment of certain Board-supervised banks that facilitates responsible innovation: https://t.co/5s1I9LO9EF
— Federal Reserve (@federalreserve) December 17, 2025
The Fed concluded that keeping the 2023 framework in place would unnecessarily constrain innovation without meaningfully improving safety or stability.
What the New Policy Changes
Under the updated approach, state member banks are no longer boxed into rigid restrictions when experimenting with innovative financial activities, including those tied to digital assets and stablecoins. Instead, banks are given clearer pathways to participate responsibly, provided they maintain strong risk management and compliance standards.
Most notably, the shift opens the door for crypto-native firms to gain more direct access to the Federal Reserve’s payment infrastructure-a long-standing pain point for the industry.
Big Implications for Stablecoin Issuers
For companies like Circle, Paxos, Tether, and BitGo, the change could be transformative. These firms may now be able to hold customer reserves directly at the Federal Reserve, rather than routing funds through intermediary commercial banks.
That shift would lower operational costs, reduce counterparty risk, and give issuers greater control over liquidity and settlement flows-a long-sought goal for stablecoin operators navigating fragmented banking relationships.
The move also strengthens the foundation for regulated, dollar-backed stablecoins, particularly as US lawmakers push forward with frameworks like the GENIUS Act.
A Contrast With Past Legal Battles
The Fed’s reversal also casts new light on past disputes over crypto access to payment rails. Some firms previously sought specialized banking charters to bypass regulatory bottlenecks, including Wyoming’s Special Purpose Depository Institution (SPDI) model.
One high-profile case involved Custodia Bank, which sued the Federal Reserve Board and the Kansas City Fed over what it described as an “unlawful delay” in granting access to Fed services. While a court dismissed the case, Custodia has since appealed, and the matter remains unresolved.
Under the new policy environment, similar confrontations may become less common, as the Fed signals a willingness to integrate crypto-related activity rather than wall it off.
A Meaningful Shift in Tone
Taken together, the changes represent one of the clearest signals yet that US regulators are moving away from the informal “debanking” era and toward a more structured, rules-based engagement with crypto.
For banks and digital asset firms alike, the Fed’s decision offers renewed clarity, reduced friction, and a stronger foundation for innovation within the US financial system.
