Recently, the Fed withdrew its 2023 policy statement and issued a new statement regarding the treatment of certain Fed-supervised banks, with the aim of facilitating “responsible innovation” in the banking sector. The new statement replaced the previous approach (covered by InfoBytes here), which had limited Fed-supervised state member banks to the same activities permissible for banks supervised by other federal banking agencies, including activities related to digital assets. The Fed cited evolving financial system dynamics and a deeper understanding of innovative products and services as reasons for the change.

The new policy statement set forth a framework in which insured and uninsured state member banks may engage in innovative activities, provided these activities align with principles of safety, soundness and financial stability. The Fed will now interpret Section 9(13) of the Federal Reserve Act to apply the principle of “same activity, same risks, same regulation,” and allows for different regulatory treatment when activities present different risks. Insured state member banks must continue to comply with the FDI Act and seek FDIC approval for activities not permitted for national banks, while uninsured state member banks require Fed permission for activities outside those bounds.