Overview
On December 17, 2025, the Federal Reserve Board (FRB) rescinded a policy statement issued in 2023 (2023 Policy Statement) regarding the treatment of state member banks with regard to limitations on "novel banking activities," including crypto-asset activities, and replaced it with a new policy statement (2025 Policy Statement).1 Specifically, the 2025 Policy Statement differentiates between insured and uninsured state banks, especially with regard to receiving prior permission to engage in activities not otherwise permissible. The new statement may make it easier for certain state member banks to receive permission to engage in novel, innovative banking activities, including but not limited to those involving crypto-assets.
Both the 2023 Policy Statement and the 2025 Policy Statement cover Section 9(13) of the Federal Reserve Act, which the FRB "interprets . . . as vesting the [FRB] with the authority to prohibit or otherwise restrict state member banks and their subsidiaries from engaging as principal in any activity . . . that is not permissible for a national bank, unless the activity is permissible for state banks by federal statute or under" the regulations of the Federal Deposit Insurance Corporation (FDIC). Likewise, both statements cover both insured and uninsured state member banks.
2023 Policy Statement
The 2023 Policy Statement took the general stance that "the same bank activity, presenting the same risks, should be subject to the same regulatory framework, regardless of" whether the state member bank is insured or uninsured (and therefore what agency supervises it). Accordingly, the FRB would limit state member banks to acting as a principal only for activities permissible for national banks, subject to the same terms, conditions, and limitations on national banks' permission for such activities (unless otherwise permitted for state banks by federal statute or FDIC regulations).
If an activity is not permissible for national banks, then a state member bank seeking to engage in a given activity would have to receive prior permission from the FRB. To receive such permission, the state member bank would have to show a "clear and compelling rationale" for the deviation in regulatory treatment and would have to maintain "robust plans for managing the risks of the proposed activity in accordance with principles of safe and sound banking." Even after obtaining permission, the state bank would still need to conduct its business "with due regard to safety and soundness," and would have to "demonstrate an effective control environment" related to "any novel and unprecedented activities." This general rule applies equally to both insured and uninsured state banks.
The 2023 Policy Statement was accompanied by supplementary information discussing specific crypto-asset activities, specifically (1) holding crypto-assets as principal and (2) issuing dollar-denominated tokens. First, the FRB found no authority permitting national banks to hold crypto-assets as principal in any amount, nor any federal rule or statute permitting state banks to do the same. Accordingly, the FBR would presumptively prohibit state member banks from holding crypto-assets as principal. And second, guidance from the Office of the Comptroller of the Currency (OCC) established the conditions under which national banks would be permitted to issue dollar tokens. Likewise, the FRB would presumptively require state member banks to meet all OCC requirements before issuing dollar tokens.
2025 Policy Statement
The 2025 Policy Statement generally agreed with the 2023 Policy Statement's stance that "the same bank activity, presenting the same risks, should be subject to the same regulatory framework." However, it then articulated the "reciprocal principle" that "a different activity, presenting different risks, should be subject to a different regulatory framework." The 2025 Policy Statement therefore treats insured and uninsured state member banks differently, especially with regard to receiving permission prior to engaging in activities not permitted for national banks or otherwise permitted by federal law or regulations.
Under the 2025 Policy Statement, the FRB would "limit the authority of insured state member banks and their subsidiaries to engage in any activity as principal to those activities that are permissible for national banks" subject to the same terms, conditions, and limitations, provided that the activity is permitted under state law. The same holds true for any activities permissible under FDIC regulations. If there is no authority under federal statute or FDIC regulations for an insured state-chartered bank to engage in a given activity, then it must receive permission from the FDIC under the Federal Deposit Insurance Act and comply with FRB capital requirements.
On the other hand, an uninsured state member bank may not engage in any activity as principal that is not authorized for a national bank or an insured state-chartered bank unless it is permitted under FRB regulations or the uninsured state bank receives prior permission from the FRB. In determining whether to grant such permission, the FRB "will consider whether the uninsured state member bank would be capable of engaging in such activity in a safe and sound manner and in a manner that is consistent with preserving the stability of the U.S. financial system." Insured and uninsured state banks must therefore receive prior permission for engaging in novel activities from different regulators, with different considerations.
Likewise, the 2025 Policy Statement also withdraws the supplemental information from the 2023 Policy Statement. This is likely due to the fact the specific agency stances with respect to holding crypto-assets as principal and issuing dollar-denominated tokens have changed. For example, the OCC has recently issued guidance permitting national banks to hold crypto assets as principal for limited purposes like paying gas fees or testing crypto-asset-related platforms.2 Likewise, the passage of the GENIUS Act has changed the regime for issuing US dollar stablecoins. These may continue to change as well, as regulatory agencies propose and issue new rules and guidance surrounding novel activities such as crypto-asset activities, and as Congress considers the passage of a comprehensive crypto-asset market structure bill.
Takeaways
The updated 2025 Policy Statement is "designed to facilitate innovation by state member banks in a manner that is consistent with bank safety and soundness and preserving the stability of the U.S. financial system." This echoes the statement of Vice Chair for Supervision Michelle W. Bowman, who stated that the FRB is "creating a pathway for responsible, innovative products and services" in order to "help[] ensure that the banking sector remains safe and sound while also modern, efficient, and effective." Uninsured state banks in particular benefit from the 2025 Policy Statement, as they now have a specialized road to seek prior permission to engage in novel banking activities not permissible for insured state member banks. This represents a marked change from the 2023 Policy Statement, which created a presumption against state member banks engaged in the same.
The 2025 Policy Statement was approved by all members of the FRB except for Governor Michael S. Barr, who previously served as Vice Chair for Supervision. Governor Barr stressed the "same bank activity, same risk, same regulation" principle of the 2023 Policy Statement, which "helps to level the competitive playing field among banks with different charters and different federal supervisors, mitigating the risks of regulatory arbitrage." Governor Barr disagreed with the different regulatory treatment of insured and uninsured state banks, which he argued "would, in effect, encourage regulatory arbitrage, undermine a level playing field, and promote incentives misaligned with maintaining financial stability."
Despite Governor Barr's dissent, the FRB is likely to continue to lower barriers to allowing banks to engage in crypto asset activity. Other banking regulators, including the OCC and FDIC, have provided authority for banks to engage in some crypto asset activities or otherwise made it easier for banks to engage in such activity. Therefore, although current regulations may prohibit national and state banks from engaging in specific novel banking activities, regulators are likely more amenable to discussions with market participants to facilitate the lowering of regulatory barriers in innovative markets, such as the market for crypto assets.
1Press Release, Federal Reserve Board withdraws 2023 policy statement and issues new policy statement regarding the treatment of certain Board-supervised banks that facilitates responsible innovation, Bd. of Govs. of the Fed. Reserve Sys. (Dec. 17, 2025), https://www.federalreserve.gov/newsevents/pressreleases/bcreg20251217a.htm.
2For more details on this OCC guidance, see Steptoe's coverage here.
