FDIC Removes Roadblocks to Crypto Activities in the Banking Sector

New FDIC guidance permits crypto activities by supervised institutions without prior approval, emphasizing risk management and compliance with applicable laws and regulations.

By Arthur S. Long, Parag Patel, Pia Naib, and Deric Behar

On March 28, 2025, the Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution Letter (FIL-7-2025) that provides new guidance for FDIC-supervised institutions engaging in or seeking to engage in crypto-related activities (the Guidance). Specifically, the Guidance clarifies that FDIC-supervised institutions can engage in permissible crypto-related activities without receiving prior FDIC approval. The Guidance rescinds FIL-16-2022 (Notification of Engaging in Crypto-Related Activities), issued on April 7, 2022, which initially established the prior notification requirement for crypto-related activities.

The rescission of FIL-16-2022 by the FDIC predates a series of letters sent on April 1, 2025, by House Committee on Financial Services Chairman French Hill to the heads of the FDIC, Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), Consumer Financial Protection Bureau (CFPB), Securities and Exchange Commission (SEC), and Financial Stability Oversight Council, requesting the rescission, modification, or re-proposal of specific Biden administration actions. In the letter addressed to FDIC Acting Chairman Travis Hill, the committee stated that “[t]he FDIC should withdraw FIL-16-2022, as it imposes unnecessary supervisory burdens on banks’ use of distributed ledger technology.”

The Guidance

An FDIC-supervised institution (including more than 5,000 US banks and savings associations) can engage in activities involving new and emerging technologies (such as crypto-assets) without receiving prior FDIC approval, provided that the institution adequately manages the associated risks. Risks may include market and liquidity risk; operational and cybersecurity risks; consumer protection requirements; and anti-money laundering requirements.

All crypto-related activity must be conducted “in a safe and sound manner and consistent with all applicable laws and regulations.” The FDIC also expects that entities engaged in such activities engage with their supervisory team as appropriate.

The FDIC also noted that it plans to “work with the other banking agencies to replace interagency documents” that were issued under the Biden administration, including: (i) the Joint Statement on Crypto-Asset Risks to Banking Organizations (January 3, 2023) (for more information, see this Latham blog post), and (ii) the Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (February 23, 2023).

The FDIC also plans to engage with the President’s Working Group on Digital Asset Markets and “expects to issue further guidance” regarding crypto-related engagement by FDIC-supervised institutions.

Supporting Comments

FDIC Acting Chairman Hill commented on the Guidance, stating that it demonstrates that “the FDIC is turning the page on the flawed approach of the past three years.” He also said that he “expect[s] [the Guidance] to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards.”

Bo Hines, the White House’s Executive Director of the President’s Council of Advisers on Digital Assets also applauded the Guidance, calling it “[a]nother big win [for crypto]” and “[a] huge step forward towards innovation and adoption.”

Regulators Taking a Fresh Approach to Crypto and Reputational Risk

The FDIC’s Guidance follows a similar move by the OCC on March 7, 2025, which reaffirmed that OCC-supervised banks may participate in a range of crypto-related activities without the supervisory nonobjection process that was prescribed in a 2021 Interpretive letter (for more information, see this Latham blog post).

The Guidance effectuates one of the key agenda items Acting Chairman Hill highlighted a day after he was appointed to the post. Among his priorities for the agency, Hill stated that he intended for the FDIC to “[a]dopt a more open-minded approach to innovation and technology adoption, including a more transparent approach to fintech partnerships and to digital assets and tokenization.” In an earlier speech on FDIC policy issues at the American Bar Association, Hill also stated that the FDIC approach to crypto under the Biden administration had been “damaging” and “stifled innovation.” He asserted that “putting an end to any and all Choke Point-like tactics” is a critical first step for the FDIC (for more information, see this Latham blog post).

The FDIC’s move continues the trend in which federal financial market regulators are taking a fresh look at crypto-related policies, rules, regulations, proposals, and guidance (for more information, see this Latham blog post on the SEC’s Crypto task force; this Latham blog post on the SEC’s dismissal of its appeal of adverse judicial decisions related to its definition of dealer; and this Latham blog post about the SEC’s position on meme coins). And like the OCC’s recent actions, they also align with the Trump administration’s commitment to dismantling the previous administration’s stance toward crypto that effectively prevented banks from engaging with digital asset companies or innovating their own digital asset products and services.

The Guidance is also very much related to legislators’ recent efforts to promote innovation and eliminate reputational risk from examination and oversight of financial institutions, as banks often cited reputational risk as a justification for refusing to provide services to crypto companies (or for debanking parties who were connected to the crypto industry).

On March 6, 2025, Senate Committee on Banking, Housing, and Urban Affairs Chairman Tim Scott introduced the Financial Integrity and Regulation Management (FIRM) Act, legislation to eliminate reputational risk as a component of banking supervision, and leaving intact quantitative supervisory measures (e.g., concentration risk, liquidity risk, etc.). Specifically, the FIRM Act would:

• eliminate all references to reputational risk as a measure to determine the safety and soundness of regulated depository institutions;
• eliminate the Federal banking agencies’ ability to promulgate new rules or guidance that use reputational risk to supervise or regulate depository institutions; and
• require the Federal banking agencies to report to Congress on their elimination of reputational risk as a component of the supervision of depository institutions.

Following Chairman Scott’s introduction of the FIRM Act, the OCC proactively announced on March 20, 2025, that is was no longer “examin[ing] its regulated institutions for reputation risk and is removing references to reputation risk from its Comptroller’s Handbook booklets and guidance issuances.”

The FDIC has not yet taken any official action on reputational risk, but Acting Chairman Hill stated in a March 24, 2025, letter to Dan Meuser, Chairman of the Subcommittee on Oversight and Investigations of the House Committee on Financial Services, that the FDIC has “conducted a review of all mentions of reputational risk or similar terms in [its] regulations, guidance, examination manuals, and other policy documents, resulting in a lengthy inventory, with plans to eradicate this concept from [the FDIC’s] regulatory approach.” Acting Chairman Hill continued by stating that the FDIC is “actively working on a rulemaking to ensure supervisors do not criticize activities or actions on the basis of reputational risk, which we expect to be able to issue in the near-future.”

Thus far, of the federal banking regulators, only the FRB has not issued any fresh statement or guidance with respect to crypto-related activities, nor has it formally rescinded its crypto-specific Supervision and Regulation Letter from the prior administration (SR 22-6 / CA 22-6: Engagement in Crypto-Asset-Related Activities by Federal Reserve-Supervised Banking Organizations), issued on August 16, 2022.¹ While SR 22-6 did advise FRB-supervised banking organizations to notify their lead supervisory point of contact at the FRB prior to engaging in cryptoasset-related activities, it did not specifically require prior approval (as in the case of the FDIC) or non-objection (as in the case of the OCC)). However, in a Supervision and Regulation Letter issued on August 8, 2023 (SR 23-8 / CA 23-5: Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens), the FRB did establish a supervisory nonobjection process for state member banks seeking to engage in stablecoin activities.

While the FRB has not yet taken any official action on reputational risk or crypto engagement by regulated entities, in a February 11, 2025 congressional hearing before the Senate Committee on Banking, Housing, and Urban Affairs, Committee Chairman Scott asked FRB Chairman Powell if he would “commit to working with this committee to end de-banking, including working with the new vice chair of supervision (once appointed) to revise the Federal Reserve supervision manuals to remove reputational risk as a tool to weigh in on political topics?” to which Chairman Powell responded, “I’m happy to make that commitment.”

Official action by the FRB, however, may not be far off. In the letter sent on April 1, 2025, by House Committee on Financial Services Chairman French Hill to FRB Chairman Powell, the committee stated that the FRB “should rescind SR 22-6 and SR 23-8, as both impose unnecessary supervisory burdens on the use of distributed ledger technology.”

With Congress particularly focused on opening up the channels of the digital asset economy in the US, eliminating reputational risk as a supervisory factor, and fostering financial inclusion by eliminating the practice of debanking, the federal banking regulators are now demonstrating their willingness to roll back legacy policies and practices that defined the previous administration.