Page 1 of 3

BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551 

DIVISION OF SUPERVISION

AND REGULATION

SR 23-7 

August 8, 2023

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK

SUBJECT: Creation of Novel Activities Supervision Program 

The Federal Reserve has established a Novel Activities Supervision Program (Program) 

to enhance the supervision of novel activities conducted by banking organizations supervised by 

the Federal Reserve. The Program will focus on novel activities related to crypto-assets, 

distributed ledger technology (DLT), and complex, technology-driven partnerships with 

nonbanks to deliver financial services to customers. The Program will be risk-focused and 

complement existing supervisory processes, strengthening the oversight of novel activities 

conducted by supervised banking organizations. 

Background 

Financial innovation supported by new technologies can benefit the U.S. economy and 

U.S. consumers by spurring competition, reducing costs, creating products that better meet 

customer needs, and extending the reach of financial services and products to those typically 

underserved. Innovation can also lead to rapid change in individual banks or in the financial 

system and generate novel manifestations of risks that can materially impact the safety and 

soundness of banking organizations. Given the novelty of these activities, they may create 

unique questions around their permissibility, may not be sufficiently addressed by existing 

supervisory approaches, and may raise concerns for the broader financial system. 

Novel Activities Supervision Program

The Federal Reserve established the Program to ensure that the risks associated with 

innovation are appropriately addressed. The Program will enhance the supervision of novel 

Applicability: This letter applies to all banking organizations supervised by the Federal 

Reserve, including those with $10 billion or less in consolidated assets.
Page 2 of 3

activities conducted by supervised banking organizations, with a focus on the following 

activities: 

• Complex, technology-driven partnerships with non-banks to provide banking services – 

Partnerships where a non-bank serves as a provider of banking products and services to 

end customers, usually involving technologies like application programming interfaces 

(APIs) that provide automated access to the bank’s infrastructure. 

• Crypto-asset related activities – Activities such as crypto-asset custody, cryptocollateralized lending, facilitating crypto-asset trading, and engaging in stablecoin/dollar 

token issuance or distribution.1

• Projects that use DLT with the potential for significant impact on the financial system – 

The exploration or use of DLT for various use cases such as issuance of dollar tokens and 

tokenization of securities or other assets.

• Concentrated provision of banking services to crypto-asset-related entities and fintechs –

Banking organizations concentrated in providing traditional banking activities such as 

deposits, payments, and lending to crypto-asset-related entities and fintechs. 

The Program will work in partnership with existing Federal Reserve supervisory teams to 

monitor and examine novel activities conducted by supervised banking organizations. 

Supervised entities engaging in novel activities will not be moved to a separate supervisory 

portfolio. Instead, the Program will work within existing supervisory portfolios and alongside 

existing supervisory teams. The Program will leverage current supervisory processes to the 

extent possible to maximize efficiency and minimize burden. 

The Program will be risk-based, and the level and intensity of supervision will vary based 

on the level of engagement in novel activities by each supervised banking organization. The 

Federal Reserve will notify in writing those supervised banking organizations whose novel 

activities will be subject to examination through the Program. The Federal Reserve will 

periodically evaluate and update which banking organizations should be subject to the 

examination of novel activities through the Program, and banking organizations will be notified 

accordingly. In addition, as part of the Program, the Federal Reserve will routinely monitor

supervised banking organizations that are exploring novel activities. 

To help ensure the Program is informed by diverse perspectives and best practices in 

supervision and risk-management, it will be advised by a range of multidisciplinary leaders from 

around the Federal Reserve System. To stay abreast of emerging issues, technologies, and new 

products, the Program will engage broadly with external experts from academia and the banking, 

finance, and technology industries. The Program will incorporate insights and analysis from real1 See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the 

Comptroller of the Currency, “Joint Statement on Crypto-Asset Risks to Banking Organizations”, January 3, 2023,

and Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the 

Comptroller of the Currency, “Joint Statement on Liquidity Risks to Banking Organizations Resulting from CryptoAsset Market Vulnerabilities”, February 23, 2023.
Page 3 of 3

time data, market monitoring, horizontal exams, and proactive, intentional, and regular 

information exchange across portfolios, federal bank regulatory agencies, and other stakeholders. 

Through this Program, the Federal Reserve will continue to build upon and enhance its 

technical expertise to better understand novel activities, the novel manifestations of risks of such 

activities, and appropriate controls to manage such risks. In addition to enhancing the 

supervision of risks associated with banking organizations engaging in novel activities, the 

Program will also inform the development of supervisory approaches and guidance for banking 

organizations engaging in novel activities, as warranted. 

The Program will help ensure that regulation and supervision allow for innovations that 

improve access to and the delivery of financial services, while also safeguarding bank customers, 

banking organizations, and financial stability. The Program will also operate in keeping with the 

principle that banking organizations are neither prohibited nor discouraged from providing 

banking services to customers of any specific class or type, as permitted by law or regulation.

Reserve Banks are asked to distribute this letter to the supervised banking organizations 

in their districts and to appropriate supervisory staff. In addition, questions regarding this letter 

may be sent via the Board’s public website.2

 

Michael S. Gibson

Director

Division of Supervision and Regulation

2 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.