On Thursday the Federal Reserve issued a statement that it will be ending chokepoint practices by no longer making it an obligation for member banks to provide advanced notice of crypto and stable coin related ventures.  Instead, it will monitor engagement with digital assets like it would any other banking activities.  In its press release, the Fed states that "These actions ensure the Board's expectations remain aligned with evolving risks and further support innovation in the banking system."  

This change in policy comes after similar moves made by the FDIC and Office of the Comptroller of the Currency, who clarified that banks are legally permitted to engage in crypto related activities and no longer required to receive explicit permission from regulators to do so.   This news is a huge shift in further allowing banks to add assets like Bitcoin to its balance sheets.

American member banks were previously discouraged from engaging with crypto by the Fed, FDIC, and OCC, who jointly ordered banks to provide notice of any intention in dealing with crypto due to the fallout from the FTX collapse.

Despite lifting these rules, the Fed still continues it policies of refusing to give crypto focus banks likes Custodia and Kraken Financial, master accounts which would grant Fed members access to the central bank's services.  Such access would allow banks to engage in more meaningufl services nationwide.

In a recent statement, Citigroup has acknowledged Bitcoin's resilience amidst tariff-induced volatility, and outperforming the S&P on a volatility adjusted basis.  Citigroup called Bitcoin a "specific risk premium, aligning with the concept of "digital gold".  And although Citigroup remains skeptical of likening Bitcoin to gold, they recognize Bitcoin's performance during financial stress periods (SVB turmoil, Sept 23 US Bond term-premium rise, recent market volatility) "warrants attention as a potential indicator of its maturing adoption and purpose as an asset class."

As Bitcoin has demonstrated its ability to weather financial uncertainty and continue to see increase in price and ETF inflows during these times, the Fed's pivot seems to create an opportunity for banks to get on the orange life raft.

Thank you for your time and attention. 

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Happy Stacking,

B

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