Overview
The Federal Reserve just did something regulators almost never do: it tore up its own recent guidance and replaced it. The target was its 2023 interpretation of Section 9(13)—the Fed’s leverage over what state member banks can do when they step into “new and weird” business lines.
This isn’t just paperwork. It’s a signal flare: the Fed is stepping back from the post-crypto-crash crackdown mindset and shifting toward “try it, but manage it” supervision—exactly the kind of change banks and fintech partners have been lobbying for. One governor, Michael Barr, publicly dissented, warning the rewrite invites charter-shopping and a race to the bottom.
Key Indicators
People Involved
Organizations Involved
The Fed board sets the supervisory tone for state member banks—and just shifted it toward innovation.
The FDIC can approve (or block) certain nontraditional activities by insured state banks.
The OCC sets what national banks can do—often the floor and ceiling for others.
Timeline
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The new Section 9(13) policy becomes effective
Rule ChangesThe Fed rescinded the 2023 policy statement, removed the crypto discussion, and issued replacement guidance.
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Barr breaks ranks: “This invites regulatory arbitrage”
StatementGovernor Barr issued a formal dissent, arguing the change undermines equal treatment across bank charters.
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Fed withdraws its 2023 Section 9(13) stance
Rule ChangesThe Board withdrew the 2023 policy statement and issued a replacement aimed at facilitating responsible innovation.
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Fed sunsets the Novel Activities program
SupervisionThe Fed ended the dedicated novel-activities unit and folded oversight into normal supervision.
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Fed withdraws crypto and dollar-token supervisory letters
Rule ChangesThe Fed rescinded its crypto notification expectation and its dollar-token nonobjection process.
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FDIC: no more pre-approval for crypto activities
Rule ChangesReuters reported the FDIC said banks can engage in crypto activities without prior approval, if managed safely.
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OCC loosens the screws on bank crypto activity
Rule ChangesReuters reported the OCC cleared a path for banks to engage in certain crypto activities without prior approval.
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Fed creates a “Novel Activities” supervision program
SupervisionA dedicated program targeted crypto, DLT, and complex fintech-bank partnerships.
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2023 Section 9(13) policy becomes official record
Rule ChangesThe policy statement was published in the Federal Register, including crypto-specific supplementary discussion.
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The Fed draws a bright line around “novel” bank activities
Rule ChangesThe Board issued its 2023 Section 9(13) policy statement, emphasizing “same activity, same risks, same regulation.”
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Fed tells banks: crypto plans, tell us first
SupervisionThe Fed set an expectation that supervised banks notify it in advance about crypto-asset activities.
Scenarios
Banks Rush Back Into Tokenization and “Bank-Native” Crypto Plumbing
Discussed by: Bank and market observers tracking the 2025 rollback; industry letters urging removal of barriers to digital-asset innovation.
Banks interpret the rewrite as a practical green light: fewer bespoke “mother-may-I” gates and more room to pilot custody, tokenized deposits, and DLT settlement rails inside traditional risk management. The trigger is simple—large banks and regional players start launching controlled products with mainstream counterparties, and supervisors treat them like any other operational/market risk problem instead of a special category. Expect a wave of cautious launches, not a free-for-all.
Congress Smells Charter-Shopping and Hauls the Fed In for Hearings
Discussed by: Barr’s dissent and broader press coverage framing the Fed’s supervisory shift as deregulation.
If a bank uses the new posture to do something other regulators would have blocked—or if an uninsured state member bank becomes the vehicle for a controversial new activity—lawmakers will frame it as regulatory arbitrage. The trigger is a single headline-grabbing failure or near-miss: a run, a loss, a payments disruption, or a stablecoin-related incident tied to a supervised bank. The political response would push the Fed back toward tighter, more uniform constraints.
Regulators Try Again: A New Interagency “Rules of the Road” for Bank Crypto
Discussed by: The Fed’s own language about reconsidering guidance after withdrawing earlier crypto statements; ongoing regulator coordination pressures.
After pulling back 2022–2023 guardrails, agencies may attempt a cleaner framework: clear risk-management expectations, standardized disclosures, and a common taxonomy for custody, token issuance, and settlement activities. The trigger is growing bank participation plus examiner inconsistency across agencies. This ends with a new joint statement or a set of aligned supervisory principles that reintroduce structure without reintroducing blanket hostility.
Historical Context
FDICIA Section 24 (1991): The “no weird principal activities” backstop
1991–presentWhat Happened
After the savings-and-loan era, Congress tightened rules on what insured state banks can do as principal if national banks can’t do it. The point was to protect deposit insurance and stop risky experimentation from being subsidized by the safety net.
Outcome
Short term: Insured state banks faced a higher bar for nontraditional principal activities.
Long term: Regulators leaned on “same activity, same risk” arguments to fight charter arbitrage.
Why It's Relevant
Section 9(13) is the Fed’s matching tool—so reinterpretation changes how hard that backstop bites.
OCC’s crypto whiplash (2020–2021): From permissions to preconditions
2020–2021What Happened
The OCC first clarified that national banks could provide crypto custody and use stablecoins for payments. Then it shifted to a model where banks could do some activities only after demonstrating controls and receiving supervisory nonobjection.
Outcome
Short term: Banks got clarity, but expansion slowed under supervisory gating.
Long term: Regulators learned that process requirements can matter as much as legal permission.
Why It's Relevant
The Fed’s 2025 rewrite echoes that fight: permission in principle versus permission after checkpoints.
The OTS lesson (pre-2008): When firms shop for the easiest supervisor
1980s–2011What Happened
In the run-up to the financial crisis, major firms used weaker supervisory lanes to grow risk. After 2008, lawmakers concluded fragmented oversight helped fuel regulatory arbitrage and eventually eliminated the Office of Thrift Supervision.
Outcome
Short term: Oversight consolidation reduced one obvious arbitrage path.
Long term: “Race to the bottom” became a core fear in bank regulatory design.
Why It's Relevant
Barr is basically warning the Fed is recreating a smaller version of that dynamic—inside today’s charters.