Fed Ends Special Program to Supervise Innovative Financial Activities

By Matt Grossman

The Federal Reserve's board of governors said Friday that it is ending a two-year-old program created specifically to supervise innovative financial activities like crypto and fintech.

Those activities will now be regulated through the Fed's normal supervisory process, the Fed said.

"The Board has strengthened its understanding of those activities, related risks, and bank risk management practices. As a result, the Board is integrating that knowledge and the supervision of those activities back into the standard supervisory process and is rescinding its 2023 supervisory letter creating the program," the Fed's Washington, D.C.-based board of governors said in a statement.

The program had been conceived to make sure that the Fed's regulatory apparatus was keeping up with rapid changes in financial technology, like cryptocurrency and tech-driven partnerships that integrate non-banks more deeply into the world of financial services.

"Given the novelty of these activities, they may create unique questions around their permissibility, may not be sufficiently addressed by existing supervisory approaches, and may raise concerns for the broader financial system," the Fed wrote in a 2023 memo that explained the supervisory program.

Fed governor Michelle Bowman, sworn in as the Fed's new vice chair for supervision this spring, has pledged to take a "fresh look" at the Fed's role as a bank regulator.

"Regulators must be open to innovation in the banking system," Bowman said in a February speech, before she took on the vice chair for supervision role.

Write to Matt Grossman at matt.grossman@wsj.com