The Federal Reserve has announced it will end its novel activities supervision program and fold oversight of digital assets, distributed ledger technology (DLT), and complex bank-fintech partnerships back into its standard supervisory process. The program was created by Supervisory Letter SR 23‑7 on August 8, 2023, and, per the Federal Reserve’s announcement on August 15, 2025, it is now being rescinded and integrated into ordinary processes.
Under the program, the Federal Reserve used supervisory teams to intensify monitoring of four buckets of activity: digital‑asset engagements, DLT/tokenization projects, complex technology‑driven partnerships with nonbanks, and concentrated banking services to digital-asset and fintech firms. (Federal Reserve Supervisory Letter, SR 23-7 (August 8, 2023)). In sunsetting the program, the Federal Reserve’s stated rationale is straightforward: it has strengthened its understanding of these activities, their risk profiles, and banks’ risk-management practices, and can now supervise them effectively through the normal process. (Federal Reserve Press Release (August 15, 2025)). The objective is not to deregulate, but to normalize, rescinding SR 23‑7 and relying on established examination frameworks to address emerging risks without a standalone overlay.
Practical Implications
The Federal Reserve has framed the sunsetting of this program as a natural evolution and highlighted its confidence in mainstream supervisory tools to address emerging risks in the digital-asset sector. This change likely means the elimination of heightened scrutiny and regulatory barriers while maintaining the expectation that novel activities will face the same risk-based scrutiny as other banking functions. Bottom line: the bar has not been lowered; it has been moved back to the familiar, and market participants should aim to meet it with disciplined, mainstream compliance.
