Interest Rate Cuts and Regulatory Shift - What Impact Will the Fed Have on the Encryption Industry in 2025?

The U.S. economy in 2025 is standing at a complex Node. In the early hours of October 15, Fed Chairman Powell hinted that the U.S. labor market continues to deteriorate. Despite the government shutdown affecting the assessment of the economy, he still retains the possibility of an interest rate cut this month. He also revealed that the Fed may stop the asset balance sheet reduction (tapering) in the coming months. As a result, the overnight U.S. stock market saw a collective rebound from the lows, with the Dow Jones turning strong and the Nasdaq's decline narrowing from 2.12% to 0.76%.

This adjustment in monetary policy has also triggered a chain reaction in the cryptocurrency market. Mainstream crypto assets like Bitcoin and Ethereum generally rose in the weeks following the policy announcement, while the investment behaviors of traditional financial institutions showed new divergences. The transmission effect of interest rate cuts on the macro economy has not yet fully manifested, but the market's risk appetite has already started to warm up. Fed Chairman Jerome Powell previously stated that the cryptocurrency industry is becoming increasingly “mainstream” and anticipated that banks would strengthen their cooperation with the industry.

From a macro perspective, the logic behind this round of interest rate cuts is not complicated. There are signs of a slowdown in the U.S. labor market, with new jobs falling short of expectations for several months; for the Fed, maintaining high interest rates may exacerbate corporate financing pressures and squeeze consumer spending, while a moderate rate cut would provide a buffer for the economy's “soft landing.”

It is worth noting that, alongside the shift in monetary policy, the Fed's regulatory stance on cryptocurrencies has also quietly changed. Over the past year, this most authoritative central bank in the global financial system seems to be redefining the boundaries between “crypto” and “financial innovation.”

In 2023, the Fed established a program called the Novel Activities Supervision Program to supervise banks' involvement in “novel activities” such as cryptocurrency, blockchain, fintech collaborations, and stablecoins. The program aims to build a regulatory “beachhead” mechanism for these businesses to identify and assess their potential risks in a timely manner. According to the introduction of this program on the Fed's official website, these “novel activities” include the use of DLT (Distributed Ledger Technology), providing services in conjunction with non-bank technology institutions, and banks offering services to crypto entities.

By August 2025, the Fed announced the termination of the special regulatory program and will incorporate banks' engagement in novel activities related to cryptocurrency and financial technology into its regular regulatory process. The Fed stated in the announcement that its understanding of cryptocurrency assets and technology operations, as well as banks' risk management capabilities, has improved, and therefore it is no longer necessary to maintain a special mechanism.

Reuters pointed out in its report that this change represents the Fed's desire to shift the regulatory model from specialized monitoring to “integrated supervision” in order to reduce redundant mechanisms and improve efficiency. Banking Dive commented that this termination action means that the “differentiated labeling” of regulatory oversight on banks' cryptocurrency operations is beginning to fade, and in the future, they will be treated with regular scrutiny.

In March 2025, the FDIC announced that it would abolish its notification rule (FIL-16-2022) regarding banks' cryptocurrency activities from 2022, and would no longer require regulated banks to obtain FDIC approval before engaging in cryptocurrency-related business. Instead, as long as these banks have the capacity for compliance and risk management, they can directly participate in permissible cryptocurrency activities.

In addition, in March 2025, the Office of the Comptroller of the Currency (OCC) released Interpretive Letter 1183, which clearly states that national banks can engage in crypto asset custody, certain stablecoin activities, and participate in distributed ledger networks, without needing prior regulatory approval or a “no objection letter.” The letter also abolishes the previous requirement for regulatory prior consent for crypto activities.

In April 2025, the Fed announced that it would revoke its guidance letter issued in 2022, which required state member banks to provide prior notice before engaging in activities related to crypto assets; at the same time, it would eliminate the requirement for banks to obtain a regulatory “no objection letter” for token/digital dollar activities. The Fed pointed out that it would monitor these businesses through regular supervisory processes rather than maintaining a pre-approval system.

In addition, the Fed and the FDIC also jointly withdrew the joint statement issued in 2023 that restricted banks' exposure to or risks related to cryptocurrency assets.

In July 2025, the Fed, FDIC, and OCC jointly released a statement regarding risk management considerations for banks when holding, custodial managing of cryptocurrency assets for clients, or providing related services. The statement emphasized that if banks are to custody cryptocurrency assets for clients, they must ensure operational safety and soundness, comply with applicable laws and regulations, and pay attention to operational risk, key management risk, anti-money laundering requirements, liquidity risk, and more.

It is worth noting that this statement does not propose new regulatory requirements but rather reiterates that “banks should manage the risk control of their cryptocurrency business just like they do for traditional businesses.” In other words, this is a “guiding” document rather than a mandatory prohibition.

Subsequently, in July, the Fed, 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 services for clients' crypto assets or related services are provided. The tone of the document is neutral, no longer carrying the past implication of 'first set defenses and then observe,' but instead emphasizes the importance of compliance, transparency, and risk control. This shift is seen as a 'easing' between regulation and the market.

On the policy level, the logic of regulation has also become more refined. Fed Governor Christopher Waller mentioned in a mid-year speech that stablecoins for payments should be backed by at least an equivalent amount of safe, highly liquid assets, ensuring that users can redeem them at face value. This position is consistent with the direction of the “GENIUS Act” passed by Congress in 2025.

Alongside the regulation of stablecoins is the repositioning of central bank digital currency (CBDC) issues. In recent years, there has been ongoing discussion about whether the Fed should directly issue a digital dollar to the public. However, under the new legislative environment, this possibility has essentially been ruled out.

From a macro policy perspective, the series of measures taken by the Fed reflects a mindset of “returning to order”. Regulators no longer view crypto assets as outliers, but rather incorporate them into the institutional framework for understanding. In recent years, the main tone of regulation has been to prevent risks and suppress bubbles; whereas the current focus has shifted to allowing innovative activities to grow within a controllable range.

For the market, this means a clearer expected environment. If banks want to engage in cryptocurrency services, they know which rules to follow; if stablecoin issuers want to obtain licenses, there are specific standards. Such predictability is key to whether financial innovation can develop steadily.