On Friday the US Federal Reserve shuttered its ‘novel activities’ program created in 2023. When it launched, the regulator said it aimed to “ensure that the risks associated with innovation are appropriately addressed.” It mainly applied to DLT, crypto-assets, banks supporting the crypto sector and complex technology driven partnerships with non banks.
The Federal Reserve says it now understands the risks better, so these activities can be included in the standard supervisory process. In April it also rescinded several letters targeting crypto and DLT, including one that required a non objection letter for the launch of related activities. The program’s restrictive approach had real-world consequences for blockchain banking initiatives.
Freedom of Information requests to the FDIC indicated that it prevented the launch of the USDF Consortium for interbank payments between community banks, which eventually abandoned the initiative. It wasn’t the only one with this goal.
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