The US economy in 2025 stands at a complex juncture. In the early morning hours of October 15th, Federal Reserve Chairman Powell hinted that the US labor market continues to deteriorate. Although the government shutdown has impacted economic outlook, he still maintains the possibility of a rate cut this month. He also revealed that the Fed may halt its balance sheet reduction efforts in the coming months. As a result, the three major US stock indexes rebounded from their lows overnight, with the Dow Jones Industrial Average rebounding strongly and the Nasdaq Composite Index narrowing its losses from 2.12% to 0.76%. This monetary policy adjustment also triggered a chain reaction in the cryptocurrency market. Major crypto assets such as Bitcoin and Ethereum generally rose in the weeks following the policy announcement, while investment behavior among traditional financial institutions also diverged. While the macroeconomic impact of the rate cut has yet to fully manifest, market risk appetite has already begun to rise. Federal Reserve Chairman Jerome Powell previously stated that the cryptocurrency industry is becoming increasingly mainstream and expects banks to strengthen their collaboration with the sector. From a macro perspective, the logic behind this round of rate cuts is not complex. The US labor market has shown signs of slowing, with job creation falling short of expectations for several consecutive months. For the Fed, maintaining high interest rates could exacerbate corporate financing pressures and squeeze consumer spending, while moderate rate cuts would provide a cushion for a soft landing for the economy. More notably, alongside this shift in monetary policy, the Fed's regulatory stance on cryptocurrencies has also quietly shifted. Over the past year, the most authoritative central bank in the global financial system appears to be redefining the boundaries between "crypto" and "financial innovation." In 2023, the Federal Reserve established the Novel Activities Supervision Program to oversee banks' involvement in "novel activities" such as crypto, blockchain, fintech collaborations, and stablecoins. The program aims to establish a "bridgehead" regulatory mechanism for these businesses, enabling timely identification and assessment of potential risks. The Federal Reserve's website describes this program as "novel activities" including the use of distributed ledger technology (DLT), collaborations with non-bank technology firms, and banks providing services to crypto entities. By August 2025, the Federal Reserve announced the termination of this specialized regulatory program and incorporated banks' novel activities in crypto and fintech into its regular supervisory procedures. The Fed stated in the announcement that its understanding of crypto assets and technology businesses, as well as banks' risk management capabilities, have improved, eliminating the need to maintain the dedicated mechanism. Reuters reported that this shift reflects the Fed's desire to shift its regulatory model from specialized oversight to "integrated supervision" to reduce duplication and improve efficiency. Banking Dive commented that this termination means that the regulatory "differentiation label" for banks' crypto businesses is beginning to fade, and that they will be subject to regular review in the future. In March 2025, the FDIC issued a notice stating that it would repeal its 2022 notice rule (FIL-16-2022) on bank crypto activities, no longer requiring regulated banks to obtain FDIC approval before conducting crypto-related business. Instead, as long as these banks have the necessary compliance and risk management capabilities, they can directly engage in permissible crypto businesses. Furthermore, in March 2025, the Office of the Comptroller of the Currency (OCC) issued Interpretive Letter 1183, clarifying that national banks could engage in crypto asset custody, certain stablecoin activities, and participate in distributed ledger networks without prior regulatory approval or a "no action letter." The letter also abolished the previous requirement for regulatory approval for crypto activities. In April 2025, the Federal Reserve announced that it would rescind its 2022 guidance letter requiring state member banks to provide prior notice before engaging in crypto asset activities. It also eliminated the requirement for banks to obtain regulatory "no action letters" for token/digital dollar activities. The Fed stated that it would monitor these businesses through its regular supervisory process, rather than maintaining a pre-approval system. In addition, the Federal Reserve and the FDIC also withdrew from a 2023 joint statement restricting banks' exposure to or risks associated with crypto assets. In July 2025, the Federal Reserve, the FDIC, and the OCC jointly issued a statement on risk management considerations for banks holding, custodial, or providing services to clients. The statement emphasized that banks must ensure safe and robust operations when custodial crypto assets for clients, comply with applicable laws and regulations, and pay attention to operational risks, key management risks, anti-money laundering requirements, and liquidity risks. Notably, this statement did not propose new regulatory requirements but reiterated that "banks should conduct risk management for crypto assets, just as they do for traditional businesses." In other words, this is a "guidance" document, not a mandatory ban. Subsequently, in July, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly issued a statement clarifying the risk management requirements for banks when custodial crypto assets or providing related services for clients. The document's tone was neutral, no longer carrying the "prepare first, then observe" tone of the past, but instead emphasizing the importance of compliance, transparency, and risk management. This shift was seen as a "detente" between regulators and the market. At the policy level, the regulatory logic has also become more refined. In his mid-year speech, Federal Reserve Governor Christopher Waller stated that payment stablecoins should be backed by at least an equal amount of safe, liquid assets and guarantee redemption at face value. This position is consistent with the GENIUS Act passed by Congress in 2025.
Parallel to the regulation of stablecoins is a reorientation of the issue of central bank digital currencies (CBDCs). For the past few years, there has been ongoing discussion about whether the Federal Reserve should issue digital dollars directly to the public. However, under the new legislative environment, this possibility has been largely ruled out.
From a macroeconomic policy perspective, the Fed's series of measures reflects a "return to order" approach. Regulators no longer view crypto assets as outliers, but instead understand them within the framework of the system. Over the past few years, the main focus of regulation has been on preventing risks and curbing bubbles; now the emphasis is shifting to allowing innovative activities to grow within a controlled range.
For the market, this means a clearer environment of expectations. Banks seeking to engage in crypto services now know which rules to abide by, and stablecoin issuers seeking licenses now have specific standards. This predictability is key to the stable development of financial innovation.
Catherine
Kikyo
Weatherly
Anais