Loosened supervision by regulators boosts banking involvement in cryptocurrency transactions
In a notable shift, the American regulatory landscape has become more predictable and supportive towards cryptocurrency, leading to a surge in interest and involvement from banks and financial institutions. This transformation has been marked by key developments such as the enactment of the GENIUS Act, which establishes the first federal stablecoin framework, and the withdrawal of earlier regulatory barriers that previously discouraged banks from engaging with digital assets.
The Trump Administration, along with the President's Working Group on Digital Asset Markets, has championed a regulatory framework that embraces blockchain technology, stablecoin issuance, and tokenization. This forward-thinking approach aims to align capital rules with actual risks, rather than treating all digital assets as inherently risky.
One significant change has been the Federal Reserve's decision to end its Novel Activities Supervision Program. This move means banks no longer need prior approval for crypto involvement, allowing them to offer crypto custody, payment platforms, and invest in cryptocurrencies like Bitcoin and Ethereum. However, this shift also introduces concerns over operational, compliance, and market risks due to the volatile and sometimes opaque nature of crypto markets.
Federal banking regulators, including the Office of the Comptroller of the Currency (OCC), Federal Reserve Board, and FDIC, have issued new guidance supporting banks’ crypto activities and publicly expressed openness towards crypto innovation. This shift represents a marked change from more cautious previous stances.
Financial institutions have responded to this new environment by accelerating plans to create or leverage stablecoins and expanding digital asset services. Stablecoins, in particular, are seen as modernizing payments infrastructure and attracting significant institutional interest.
Bipartisan efforts in Congress, such as the CLARITY Act and the Responsible Financial Innovation Act (RFIA), continue to work on comprehensive regulation. These initiatives aim to clarify jurisdiction over digital assets and balance SEC and CFTC oversight, adding a layer of future clarity that banks are eagerly awaiting.
This more favorable, coordinated regulatory approach has lowered engagement barriers and fueled institutional involvement in cryptocurrency services and products in U.S. banking. This policy shift from previous years, where regulatory uncertainty and operational risks limited financial institutions’ crypto participation, represents a significant milestone.
Notable examples of this trend include Green Dot's partnership with Crypto.com, offering banking and money management tools to Crypto.com's U.S. customers. Coinbase's Request for Proposal team is also working hard to handle the influx of RFPs due to increased demand.
However, not all institutions have found success in the crypto space. Vast Bank, which was one of the first banks in the U.S. offering crypto services, exited the business last year following regulatory challenges.
As the crypto landscape continues to evolve, it is clear that the regulatory environment will play a crucial role in shaping the future of banking and cryptocurrency in the United States. With key players like Green Dot, Coinbase, and SoFi Technologies (planned to re-enter the crypto business in the next six months) at the forefront, it seems that the future of this space is bright.
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