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#Fed #Crypto In previous articles, we mentioned that U.S. financial regulators have always had complicated feelings toward the crypto industry: they worry about risks, but also fear falling behind, and in the end gradually compromise with the development of the crypto sector. This emotional attitude has been reflected in U.S. financial regulatory policy. Over the past few years, American financial regulation has repeatedly swung between relaxation and strict control, then gradually loosened. Since 2024, major institutions in the U.S. have gradually begun to “accept” the crypto industry. Recently, the Federal Reserve officially announced the cancellation of the “Novel Activities Supervision Program,” reintegrating the supervision of banks’ crypto and fintech-related businesses back into the standard regulatory process. This news has undoubtedly stirred up no small wave in the crypto community. On the surface, this is just an adjustment to the regulatory framework. But when interpreted in the broader environment, it reveals several important signals: first, a clear softening of regulators’ attitude; second, an easing of tensions between crypto firms and banks; third, a repositioning of the U.S. financial system regarding crypto. Today, let’s analyze from several angles: What does this step by the Federal Reserve mean? What opportunities and challenges will it bring to the crypto market? And where might it lead in the future? Review: The Past and Present of the Fed’s “Special Supervision Program” To understand this change, we first need to look back at the background of this regulatory program. In 2023, the U.S. banking crisis erupted: Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank all collapsed in succession — and these just happened to be banks closely connected with the crypto industry. At that time, suspicion toward the crypto sector within the financial system reached its peak. In order to prevent “innovation risks” from triggering systemic problems, the Federal Reserve urgently set up the so-called “Novel Activities Supervision Program,” aimed at applying extra scrutiny to banks engaged in crypto, blockchain, and fintech businesses. To put it bluntly, this program functioned more like a “firewall.” It did not directly prohibit banks from participating in crypto-related business, but it dramatically raised compliance costs. For many banks considering entering crypto, simply dealing with approvals and compliance discussions consumed massive resources — some even chose to give up altogether. Thus, this became one of the most common complaints from crypto firms: U.S. regulators did not outright ban, but “persuaded banks to quit” through cumbersome processes. The Logic and Significance Behind the Fed’s Sudden Cancellation: Banks No Longer “Fear Crypto” Now, the Fed has suddenly announced the cancellation of this program, returning crypto supervision to the standard process. Behind this lie at least three layers of logic: 1. A deeper understanding of crypto business risks. In the past, regulators considered crypto a “black box”: they did not understand how risks transmitted, nor the industry’s logic, so they could only apply “special treatment.” But after more than a year of research and observation, the Fed gradually realized that crypto businesses are not a monstrous flood — their risks can be managed using conventional regulatory tools. 2. A political shift in the U.S. regulatory environment. Since Trump took office, the policy direction has clearly changed. He has repeatedly released pro-crypto signals, emphasizing that the U.S. should become a “crypto innovation center.” Against this backdrop, the Fed’s move is undoubtedly aligned with broader policy, a kind of policy echo. 3. The practical needs of the financial system and banks. As the crypto industry continues to grow, if traditional banks are kept permanently outside, they will lose market opportunities. Many banks can find new profit growth points in custody, payment settlement, and cross-border services through crypto businesses. The Fed’s “loosening” is, in a sense, giving banks breathing room. For the banking sector, these changes are very direct. Previously, many U.S. banks kept their distance from crypto clients, fearing that involvement would make them a key target of regulatory scrutiny. But now, with the special supervision program gone, banks can handle crypto-related business under conventional risk management processes. In other words, as long as basic requirements like AML (anti-money laundering), KYC (know your customer), and consumer protection are met, banks can fully decide for themselves whether to offer services. This means that in the future, more banks will reconsider providing accounts, payments, and custody services to crypto firms. For the crypto industry, this is a long-awaited positive, because “opening a bank account” has been one of their biggest pain points in recent years. The Significance for the Crypto Industry: A Clearer Path to Compliance For the crypto sector, this does not mean regulation is completely lifted, but it does mean the compliance path is clearer. In the past, firms often complained about policy ambiguity: Can we do this? What approvals are required? When might we be shut down? This uncertainty forced many projects to take detours, or even move headquarters to Europe or Asia. Particularly in the U.S., despite having the world’s largest pool of capital and users, regulatory vagueness was always a headache — you might open a bank account one day, only to be told by the compliance department the next day that it’s “frozen.” Such cases have been all too common in the crypto industry. Now things are different. With the Fed, OCC, and FDIC all expressing a unified stance, banks can decide on crypto business within the existing regulatory framework. This means crypto firms can cooperate more openly and directly with banks, lowering compliance costs and reducing uncertainty. For example, previously, a crypto company seeking custody services had to repeatedly explain its business logic, prove compliance ability, and even wait for implicit “permission” from regulators. Now, banks can make the decision themselves, based on their own risk control systems. This directly improves efficiency and reduces anxiety for firms operating in the “policy gray zone.” From a long-term perspective, this certainty will bring two clear changes: 1. Capital inflows will accelerate. Institutional and traditional investors have been cautious about crypto largely because of fears of sudden regulatory shifts leading to stranded assets or exposed legal risks. The regulators’ “unified tone” now provides the market with a signal: there is a path to compliance, and as long as you follow the framework, you won’t suddenly “step on a landmine.” For traditional funds, hedge funds, and even pension funds, this is a huge positive. 2. Business models in the industry will be healthier. In recent years, many crypto projects operated in gray areas to avoid regulation, or focused on overseas markets, which limited their growth. With clearer compliance environments, projects can put more energy into product innovation and user experience, instead of “how to bypass compliance.” This not only improves overall market transparency, but also gives users a stronger sense of security. After all, retail investors’ greatest fear is project fraud or frozen funds — these risks will decrease as compliance improves. What’s more notable is that this compliance shift will not only affect the U.S. but could trigger global policy linkage. The U.S. has always been at the core of the global financial system; if even U.S. regulators begin “drawing boundaries” for crypto, major financial centers in Europe and Asia are likely to follow suit, issuing clearer policy frameworks. This would create a chain reaction: compliance becomes the “new standard” for the industry, rather than a “choice for a few projects.” From this perspective, this is not just a U.S. market positive, but a sign that the global crypto industry is maturing. In short, the era of policy ambiguity is fading. Compliance clarity will bring the crypto industry into a phase of “equal dialogue with traditional finance.” For project teams, this means fewer worries; for institutional investors, this means greater certainty; and for the whole industry, this marks the turning point from wild growth to institutionalization and scaling. Market Opportunities: Capital, Institutions, and New Business 1. Easier institutional capital inflows. A core precondition for institutional investors entering the crypto market is reliable banking and custody services. As banks open up, crypto funds, family offices, and even pension funds will be more confident in allocating digital assets. 2. Smoother payment and settlement services. Banks re-engaging in crypto payments and cross-border transfers will make digital asset use in everyday payments and settlement more widespread. For stablecoins, this is undoubtedly a massive positive. 3. New financial products may accelerate. Bank-crypto partnerships may expand beyond accounts and payments into derivatives, loans, and collateral products. This would push crypto financialization to a new level. The Tug-of-War Between Regulation and Innovation Overall, the Fed’s cancellation of the special supervision program is a form of “compromise with the market” between regulation and innovation. It acknowledges the importance of crypto business, while attempting to bring its risks under conventional frameworks. In the coming years, three trends are worth close attention: Cooperation between banks and crypto firms will increase rapidly, especially in custody, payments, and stablecoins. Compliance will accelerate as the main theme, the era of wild growth will fade, and the survivors will be those willing to embrace regulation. Policy swings will still exist, and the industry must remain flexible, avoiding overreliance on a single market. Conclusion The Federal Reserve’s cancellation of the “crypto special supervision program” is both a reassessment of the crypto industry by the U.S. financial system and a new milestone for the entire industry’s development. For banks, it is a chance to re-enter the crypto track; for crypto firms, it is a turning point in reducing compliance uncertainty; for the market, it is a signal of further institutional inflows. But we cannot be overly optimistic. Regulation will never fully let go, and risk events could always alter policy trajectories. What is certain is that the relationship between crypto and traditional finance will only grow closer. And in the future, the competition will not just be about technology and business models — but also about mastering and adapting to the regulatory environment.

#WebX2025 #Japan #Crypto At the end of summer in Tokyo, the WebX 2025 conference arrived as scheduled. Known as “Asia’s most important crypto summit,” the stage once again gathered global regulators, industry leaders, and policymakers. And the highlight this year was undoubtedly a roundtable on “Stablecoin Regulation and Applications in the U.S. and Japan.” On one side sat Heath Tarbert, former chairman of the U.S. CFTC and now Chief Legal Officer of Circle. On the other, Satsuki Katayama, Japanese Senator and Chair of the Budget Committee. Representing the world’s two most important economies, they engaged in a fiery dialogue on crypto regulation and stablecoin development. Some said this dialogue was like a “debate on the future of finance.” Others saw it as a microcosm of the battle between stablecoins and CBDCs. Either way, the signals revealed from this roundtable were enough to make the entire industry hold its breath. The U.S. Perspective: From “War” to “Embrace” If you remember the U.S. crypto environment just a year or two ago, the word was “winter.” Regulators and the industry were locked in confrontation, lawsuits were everywhere, and nearly every emerging project felt the heavy weight of uncertainty. Now, Heath Tarbert delivered a striking line on stage: “For the first time in history, the United States is truly embracing crypto assets.” 1. The Genius Act: Stablecoins Finally Gain Recognition At the core of this “embrace” is the passage of the Genius Act. The significance of this law lies in the fact that, for the first time, stablecoins were legally recognized as equivalent to cash. This means future U.S. dollar stablecoins must meet three requirements: 1:1 High-Quality Reserves: Each stablecoin must be backed by equivalent cash or Treasuries. Transparency and Auditing: Issuers must regularly disclose reserves and undergo third-party audits. Compliance-Only Issuance: Algorithmic stablecoins or those backed by risky collateral are strictly excluded. In short, the U.S. has finally given the industry a clear “moat”: compliance, transparency, and credibility. 2. America’s Dilemma: The Road Is Open, But Details Lag Behind However, Heath also admitted this is just the beginning. The U.S. still faces unresolved issues: Digital asset classification: Which are securities, which are commodities? Custody and exchange rules: Who takes responsibility, and how to protect users? Market structure legislation: How will digital assets be fully integrated into the mainstream financial system? More subtly, although the Genius Act has passed, its implementation rules are not yet in place. It’s like a building framework has been erected, but the wiring and plumbing are not finished. 3. Attitude Toward CBDCs: Cautious, Even Resistant On CBDCs, Heath was blunt: the U.S. is not in a rush. The main reason — privacy and surveillance concerns. In fact, the Genius Act explicitly prohibits the Fed from launching a CBDC in the near term, almost like “sealing off the exit in advance.” In Heath’s view, the future of the U.S. dollar is far more likely to exist in stablecoin form rather than as a CBDC. The Japanese Perspective: Stablecoins First, CBDCs Slowed Unlike the U.S.’s “legislative breakthrough,” Japan’s focus is more on practical applications. 1. Stablecoins vs. CBDCs: Japan Chooses the Former Satsuki Katayama stated firmly: “Japanese society harbors deep skepticism toward CBDCs, with privacy and decentralization being the main concerns.” She admitted that while the Bank of Japan is collaborating with the ECB and others on CBDC research, progress has been slow. Instead, Japan prefers to prioritize stablecoin development. 2. Tax Reform: Bringing Crypto Back to “Reasonable Rates” Another critical issue in Japan is taxation. Currently, crypto income is categorized as “miscellaneous income” with tax rates as high as 55%. This has driven away many young investors. Katayama revealed that Japan plans to reclassify crypto under the Financial Instruments and Exchange Act, reducing the tax rate to 20% — aligning it with stock trading and U.S. standards. The logic is simple: lower barriers → more youth participation → wider stablecoin adoption in daily payments. 3. Youth as the Driving Force In Japan, the crypto user profile is clear: young people. Katayama even pointed out that much of their information comes from “food and fashion idols.” It sounds lighthearted, but it reflects a fact: young people are embracing crypto in their own way. The Global Future of Stablecoin Applications During the roundtable, both U.S. and Japanese representatives emphasized the same point: Stablecoins are not just a crypto trading tool, but the new cornerstone of global finance. 1. Cross-Border Payments: As Simple as Email Currently, cross-border remittance fees average 6–7%, with settlement times of several days. Stablecoins flip this on its head: instant settlement, low cost, no forex fees. Heath even drew a vivid comparison: “Sending stablecoins across borders is like sending an email.” 2. Enterprise Adoption: A Potential B2B Revolution Imagine a Japanese automaker settling parts procurement with stablecoins. No bank settlement delays, no forex losses. The only obstacle is Japan’s current transaction size limits, restricting large-scale B2B adoption. But as Katayama noted, these rules are already under review. 3. Financial Inclusion: A “Dollar Alternative” for Non-G20 Nations In countries suffering severe currency depreciation, stablecoins could become the preferred savings tool. For citizens there, stablecoins = a portable U.S. dollar bank account. Hot Take: Stablecoins vs. CBDCs — The Strategic Divergence The biggest highlight of the roundtable was the strategic divergence between stablecoins and CBDCs. Japan: Skeptical of CBDCs, pragmatic in promoting stablecoin use. U.S.: Legally cementing stablecoins, even blocking short-term CBDC paths. In other words, both economic giants are tilting toward stablecoins — just with different approaches. For the industry, this implies: Clearer regulatory trends: Stablecoin compliance is inevitable. Improving tax environments: Especially in Japan, which may spark new adoption. Faster enterprise adoption: B2B payments and cross-border trade could lead the way. CBDCs left uncertain: Likely to remain “lab projects” rather than mainstream payment tools. Conclusion The WebX 2025 roundtable was not just a “U.S.–Japan dialogue,” but a global crypto regulatory weathervane. Japan showcased its pragmatism and caution: promoting adoption through tax reform and stablecoin use in daily life. The U.S. took a crucial legal step: granting stablecoins unprecedented recognition. Stablecoins and CBDCs may not be absolute opposites, but at least for the next five years, stablecoins will undoubtedly become the most practical and valuable cornerstone of blockchain finance. For investors, what does this mean? Spot the trend: Stablecoin compliance and applications will only grow. Watch the policies: Tax and trading rules directly shape market vitality. Position for the future: Whoever captures stablecoin applications will own the next gateway of financial internet. Tokyo’s discussion has already given us the answer. The rest is up to the market’s performance.