Author: Zhang Feng

In 2025, the Federal Reserve transitioned from a previously passive regulatory role to a proactive key player, profoundly influencing the global financial market landscape through a series of policy adjustments and technological innovations.

From abolishing the pre-approval system for banks' cryptocurrency businesses to promoting the "Streamlined Master Account" reform, and collaborating with multiple institutions to construct a regulatory framework while establishing its own cryptocurrency exchange, the Federal Reserve's intensive actions are driven by multiple strategic considerations: maintaining the international status of the dollar, preventing systemic financial risks, and competing for financial discourse power in the digital age.

I. Key Processes of the Federal Reserve's Involvement in Cryptocurrency in 2025

In 2025, the Federal Reserve promoted the transformation of U.S. cryptocurrency regulation from a fragmented and localized approach to a comprehensive and systematic one through a dual-track approach of "policy relaxation" and "infrastructure first."

Policy relaxation to eliminate institutional barriers for traditional banks' participation in cryptocurrency. In April 2025, the Federal Reserve took the lead in abolishing the pre-approval system for banks' cryptocurrency businesses that had been implemented since 2023, officially ending the "New Activities Supervision Program." This move meant that banks no longer needed prior regulatory approval to engage in cryptocurrency asset custody, collateral lending, and other businesses, but instead operated within the existing banking regulatory and risk management framework. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) also followed suit, with the three major regulatory agencies jointly abolishing a series of restrictive regulations, allowing the banking sector to autonomously engage in cryptocurrency financial services under controllable risks.

In June of the same year, the Federal Reserve further adjusted its regulatory orientation, clearly stating that "reputational risk" would no longer be a core indicator for assessing banks' cryptocurrency businesses. In the past, many banks avoided collaborating with cryptocurrency institutions to evade public pressure; this adjustment removed psychological barriers for banks to comply with cryptocurrency enterprises. In July, the Federal Reserve, in conjunction with the OCC and FDIC, released the "Bank Cryptocurrency Asset Custody Service Guidelines," which detailed operational norms and risk control requirements, providing a clear compliance path for traditional financial institutions to enter the cryptocurrency field.

Establishment of a regulatory framework, with stablecoins included in federal unified regulation. In August 2025, the "GENIUS Act" officially came into effect, marking the entry of U.S. stablecoin regulation into a federal unified era. The act requires stablecoin issuers to store 100% of their reserve assets in regulated financial institutions, with reserves primarily consisting of highly liquid, low-risk assets such as U.S. Treasury bonds, while also establishing strict auditing and information disclosure systems.

Under this framework, the Federal Reserve assumes the leading regulatory responsibility, responsible for reviewing the compliance of reserve assets and the risk management capabilities of issuers. This legislation not only elevated the regulatory hierarchy but also, together with the European Union's "Markets in Crypto-Assets Regulation" (MiCA), formed two major benchmarks for global stablecoin regulation.

Innovation in payment and trading infrastructure. In October 2025, Federal Reserve Governor Christopher Waller officially proposed the "Streamlined Master Account" plan at the "Payment Innovation Conference." This plan allows qualified cryptocurrency institutions, stablecoin issuers, and fintech companies to directly access the Federal Reserve's payment system without needing to go through commercial banks as intermediaries. Although these accounts do not possess the full functionalities of traditional bank accounts, such as intraday overdrafts, they enable real-time settlement of cryptocurrency transactions, with delays kept under one second, significantly reducing settlement costs and time. This move breaks the traditional banks' monopoly in the payment and clearing sector, providing the cryptocurrency industry with an efficient and low-cost funding channel.

At the same time, the Federal Reserve-led construction of a cryptocurrency exchange is also accelerating. This exchange is based on the hybrid blockchain architecture developed under the "Hamilton Project," integrating a real-time gross settlement system (RTGS) and employing zero-knowledge proof technology to balance transaction privacy with regulatory transparency needs. Testing data shows that its two-phase commit architecture (2PC) has achieved a throughput of 1.7 million transactions per second, supporting cross-chain settlements of mainstream cryptocurrencies like Bitcoin and Ethereum, as well as tokenized government bonds and gold. This will be the world's first compliance cryptocurrency trading platform led by a central bank, expected to have a profound impact on the industry landscape.

II. Regulatory Coordination Mechanism between the Federal Reserve and SEC

In the U.S. "multi-head governance" cryptocurrency regulatory system, the coordination between the Federal Reserve and the Securities and Exchange Commission (SEC) is particularly crucial, forming a complementary governance model of "functional regulation + institutional regulation."

Defining regulatory boundaries based on asset attributes. The Federal Reserve's regulatory focus is on banks' participation in cryptocurrency businesses, stablecoin issuance and circulation, and the funding channels between cryptocurrency and traditional finance; the SEC exercises jurisdiction over cryptocurrency assets that meet the definition of securities (such as security tokens and some ICO tokens) based on securities-related laws, responsible for transaction registration, behavioral norms, and investor protection.

Since 2025, both parties have further clarified their responsibilities through joint statements: in April, they reached a consensus to classify most stablecoins under the Federal Reserve-led federal regulatory framework, with the SEC only providing supplementary regulation for synthetic stablecoins with securities attributes; in July, regarding Coinbase's staking services, the SEC determined that it constituted securities brokerage services, while the Federal Reserve focused on reviewing fund custody and reserve conditions, forming a regulatory synergy.

Joint enforcement to prevent regulatory arbitrage. As the cross-domain characteristics of cryptocurrency businesses become increasingly evident, the Federal Reserve and SEC established a mechanism for information sharing and joint enforcement. In the asset custody sector, the Federal Reserve sets capital adequacy and reserve standards, while the SEC supervises information disclosure and investor protection; in the tokenized securities sector, both parties jointly released the "Tokenized Securities Regulatory Guidelines," clarifying that relevant assets must meet both payment settlement and securities regulatory requirements.

Such collaboration effectively curbed regulatory arbitrage. For example, a certain platform attempted to evade regulation with a "stablecoin + security token" composite product, but the Federal Reserve detected abnormal fund flows through the payment system monitoring, prompting the SEC to initiate a securities compliance investigation, ultimately leading to the platform's rectification, demonstrating the comprehensive regulatory capability.

III. Policy Interaction between the Federal Reserve and Congress

The Federal Reserve's involvement in cryptocurrency businesses must be conducted under legislative authorization from Congress, forming a collaborative relationship of "legislative protection + operational autonomy," but also facing the game brought by partisan politics.

Legislative authorization provides a basis for policy implementation. The legal foundation for the Federal Reserve's participation in the cryptocurrency market mainly comes from Section 13 of the Federal Reserve Act, which authorizes it to provide credit support to various institutions in "unusual and exigent circumstances." In 2025, Congress passed several pieces of legislation further empowering the Federal Reserve: the "GENIUS Act" clarified its leading role in stablecoin regulation; the "Payment System Innovation Act" provided legal basis for the "Streamlined Master Account" reform, allowing non-bank payment institutions to access the central bank's payment system.

Congress fully absorbed the Federal Reserve's professional opinions during the legislative process; for instance, the 100% reserve and periodic audit requirements in the "GENIUS Act" originated from earlier policy recommendations by the Federal Reserve. When promoting the construction of the exchange, the Federal Reserve also actively adopted public-private partnerships and open-source technology models to meet Congress's requirement of "controlling taxpayer risks."

Policy balance amid partisan differences. There are significant partisan differences in Congress regarding attitudes toward cryptocurrency regulation: the Republican Party tends to favor loose regulation, promoting the U.S. as a "global cryptocurrency hub," and supports expanding the scope of the "Streamlined Master Account"; the Democratic Party is more concerned with financial stability and consumer protection, advocating for strengthened risk control while opening the market, such as incorporating stricter anti-money laundering provisions in the "GENIUS Act."

The Federal Reserve strives to maintain policy neutrality and independence amid partisan games, seeking balance by designing open plans with risk constraints. The "Streamlined Master Account" sets balance and functionality limits while allowing open access, responding to market openness demands while embedding risk control mechanisms; the exchange's use of zero-knowledge proof technology protects transaction privacy while providing a transparent channel for regulation, gaining recognition from both parties.

IV. Direct Impacts of the Federal Reserve's Involvement in Cryptocurrency

Promoting the transformation of traditional banking services. Following the policy relaxation, large banks such as BNY Mellon and JPMorgan quickly launched services like Bitcoin custody, significantly increasing the proportion of cryptocurrency-related income in the banking sector. Small and medium-sized banks often choose to collaborate with cryptocurrency platforms to provide related services, intensifying industry differentiation. Meanwhile, the "Streamlined Master Account" reform weakened banks' intermediary position in payment and clearing, prompting them to shift towards high-value-added businesses such as structured products involving cryptocurrency assets and cross-border cryptocurrency payment solutions.

Reshaping the competitive landscape of the cryptocurrency market. Compliance has become a core competitive advantage, with the market share of regulated stablecoins significantly increasing, and mainstream stablecoins like USDC rapidly growing in scale. The compliance exchange led by the Federal Reserve attracts substantial institutional funds due to its system direct connection advantages, while traditional platforms like Coinbase shift towards providing compliance technology services for institutions. The valuation logic of cryptocurrency assets has also changed, with the proportion of trades anchored by U.S. dollar stablecoins significantly increasing, enhancing the interconnection between the cryptocurrency market and traditional finance.

Strengthening the dollar's international financial control. The vast majority of global stablecoins are pegged to the dollar, with their reserve assets primarily consisting of U.S. Treasury bonds, forming a "stablecoin—cryptocurrency trading—U.S. Treasury bond" funding cycle, further consolidating the dollar's international status. At the same time, the Federal Reserve has strengthened its ability to enforce cross-border financial sanctions through on-chain analysis technology, effectively curbing the use of cryptocurrency assets to evade sanctions and attracting global legitimate cryptocurrency capital to the U.S. market.

V. Threefold Logic of Strategic Transformation

Maintaining the international dominance of the dollar. In the face of competition from the digital yuan and euro stablecoins, the dollar's share in cross-border payments has declined. The Federal Reserve realizes that if it does not integrate the cryptocurrency system into the dollar ecosystem, it may lead to the marginalization of the dollar in the digital financial era. Therefore, by establishing the dollar as the primary settlement unit in the cryptocurrency world and binding U.S. Treasury bonds as stablecoin reserves, the Federal Reserve has constructed a new cycle to reinforce dollar hegemony.

Preventing systemic risk transmission. The connection between the cryptocurrency market and the traditional financial system is becoming increasingly tight, with cases of risk transmission frequently occurring. Events like the bankruptcy of Signature Bank demonstrate that isolated regulation is insufficient to address risks. The Federal Reserve, through leading the construction of exchanges and implementing the "Streamlined Master Account" reform, has brought cryptocurrency activities into the regulatory view, achieving market development under controllable risks.

Competing for the authority to set digital financial rules. In the context of increasing digitalization of finance, the output of technical standards and rules has become a core aspect of national competitiveness. The Federal Reserve attempts to dominate the global standards for cryptocurrency and central bank digital currencies by promoting its architecture through open-source projects like the "Hamilton Project." At the same time, the rising influence of the cryptocurrency industry in U.S. politics has also driven a moderate opening of the regulatory environment.

VI. Promoting the Compliance, Institutionalization, and Globalization of Cryptocurrency Businesses

Institutional transformation of the market ecosystem. Institutional investors will become the main force in the market, with pension funds, mutual funds, and others accelerating their entry through compliant channels. The product structure will shift from being primarily spot trading to a diverse range of compliant products such as tokenized government bonds, cryptocurrency ETFs, and structured financial products. The DeFi sector will experience differentiation, with compliant projects developing through integration with traditional finance, while fully decentralized projects that evade regulation may gradually become marginalized.

Global regulatory standards trending towards unification. The U.S. regulatory model characterized by "functional regulation + technological neutrality," along with the stablecoin framework established by the "GENIUS Act," will provide a reference for other countries. Through multilateral platforms like the G20 and the Financial Stability Board (FSB), the U.S. actively promotes the internationalization of its regulatory concepts and technical standards, facilitating cross-border cryptocurrency regulatory coordination.

Technological development balancing compliance and efficiency. Technologies such as zero-knowledge proofs, on-chain analysis, and privacy computing will be more widely used to balance regulatory transparency and user privacy. The integration of blockchain with traditional financial infrastructure will become a key focus of innovation, driving cryptocurrency trading from a closed-loop on-chain model to cross-system interconnectivity. The competition for dominance in technological standards will also intensify, becoming an important dimension of digital financial competition.

The Federal Reserve's deep involvement in cryptocurrency businesses since 2025 marks a significant power adjustment in the global financial system in the digital age. Through policy relaxation, infrastructure investment, domestic coordination, and international rule output, the Federal Reserve aims not only to consolidate the dollar's position and prevent financial risks but also to shape the future global order of digital finance. Its actions have significantly altered the operational logic of the cryptocurrency market, pushing the industry towards institutionalization and compliance.

Looking ahead, the cryptocurrency market may enter a new phase of "central bank-led compliance." For global participants, understanding the Federal Reserve's strategic intentions and policy logic, and adapting to the rule system it promotes, is key to seizing opportunities and addressing challenges in the digital financial era. Whether the Federal Reserve can achieve a long-term balance between innovation incentives and risk prevention, and whether it can continuously reinforce dollar hegemony through its cryptocurrency layout, will still be tested in the dual challenges of international competition and domestic politics.

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