Federal Reserve Rescinds 2023 Section 9(13) Policy and Reframes Approach to Bank Innovation

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Federal Reserve Rescinds 2023 Section 9(13) Policy and Reframes Approach to Bank Innovation

On December 22, 2025, the Federal Reserve finalized a notable but understated regulatory change: it formally rescinded its 2023 policy statement interpreting Section 9(13) of the Federal Reserve Act and replaced it with a new policy framework intended to better facilitate innovation by state member banks—while maintaining safety and soundness and financial system stability 2025-23548.

While not a binding rule, the policy statement matters. It signals how the Federal Reserve intends to exercise discretion when evaluating activities conducted by state member banks, particularly activities that fall outside traditional banking models.

What Changed

The 2023 policy statement was issued during a period of heightened regulatory concern around crypto assets and other “novel and unprecedented” activities. That framework created a rebuttable presumption that state member banks should generally be limited to activities permissible for national banks, coupled with heightened supervisory scrutiny for nontraditional activities.

The Federal Reserve has now fully rescinded that approach.

In its place, the Fed adopted a new policy statement that emphasizes:

• Withdrawal of the prior “novel and unprecedented activities” supervisory framework

• Removal of crypto-specific supervisory discussion from the policy record

• A shift away from prescriptive activity-based skepticism toward a principles-based approach

This action aligns with the Federal Reserve’s earlier withdrawal of crypto-related supervisory guidance and its decision to sunset the separate “novel activities supervision program.”

The New Policy Framework

The 2025 policy statement is built around two reciprocal principles:

Same activity, same risks, same regulationDifferent activity, different risks, different regulation

Under this framework, the Federal Reserve states that its intent is to facilitate innovation by state member banks, provided those activities can be conducted in a manner consistent with:

• Bank safety and soundness

• Preservation of U.S. financial system stability

Importantly, the Fed reaffirms that legal permissibility alone is not sufficient. Institutions must still demonstrate appropriate controls, governance, and risk management.

Impact on Insured State Member Banks

For insured state member banks, the practical constraints remain largely unchanged.

Insured state member banks are still subject to Section 24 of the Federal Deposit Insurance Act and Part 362 of the FDIC’s regulations. That means:

• Activities permissible for national banks are generally permissible for insured state member banks, subject to state law and OCC limitations

• Activities not permissible for national banks still require FDIC approval

• Capital compliance remains mandatory

The difference is not the rulebook—it is the regulatory tone and framing.

Impact on Uninsured State Member Banks

The most substantive clarification in the new policy statement applies to uninsured state member banks and uninsured state-chartered applicants for Federal Reserve membership.

For these institutions, the Federal Reserve outlines the factors it will consider when evaluating activities that are not permissible for insured state member banks, including:

• The regulatory framework applicable to the institution

• The nature and magnitude of the risks involved

• The institution’s internal controls and risk mitigation strategies

• Liquidity, capital, and loss-absorbing capacity

• Whether the institution can mitigate risks typically addressed by deposit insurance

The Fed also highlights resolution planning and orderly wind-down considerations as relevant factors.

Why This Matters

This change does not represent deregulation in the traditional sense. It does not expand permissible activities by default, nor does it remove statutory guardrails.

What it does do is:

• Remove a policy overlay that singled out “novel” activities for special skepticism

• Replace activity-based assumptions with risk-based evaluation

• Provide clearer expectations for institutions exploring non-traditional business models

For institutions considering fintech partnerships, emerging payment structures, or other non-standard activities, this policy shift improves clarity and predictability—even if approvals still require rigorous preparation.

Bottom Line

The Federal Reserve’s rescission of its 2023 Section 9(13) policy statement is best understood as a recalibration, not a green light.

Innovation remains possible. Scrutiny remains real. But the framework governing that scrutiny is now more principles-based, less categorical, and more aligned with traditional supervisory risk analysis.

For institutions navigating these issues, success will continue to depend less on labels—and more on documentation, governance, and execution.