Major banks in the United States are poised to expand their cryptocurrency services as President Donald Trump’s administration pushes forward pro-crypto policies. However, regulators warn that such moves could introduce significant risks to the financial system.
During previous cryptocurrency market crashes, regulators expressed relief that major banks had limited exposure to Bitcoin and other digital assets. This time, however, the situation may be different. After years of restrictions under the Biden administration, banks are now expected to receive approval to integrate crypto services into their offerings.
Trump, who has introduced his own digital token, is fostering a government environment supportive of cryptocurrency. As a result, traditional financial institutions are preparing to compete with established crypto firms such as Coinbase Global, Robinhood Markets, and BlackRock.
The Federal Deposit Insurance Corporation (FDIC) is reportedly revising its guidelines to allow banks to engage in certain crypto activities without requiring prior regulatory approval. Some banks have already engaged with officials to discuss providing crypto asset custody and exploring “tokenized deposits,” a system that could see traditional checking accounts linked to blockchain technology.
“If the rules come in and make it a real thing that you can actually do business with, you’ll find that the banking system will come in hard on the transactional side of it,” Bank of America CEO Brian Moynihan said during a CNBC interview at the World Economic Forum in Davos, Switzerland, describing crypto as “just another form of payment.”
While banks have not been entirely excluded from the crypto industry, the Biden administration had discouraged their direct involvement. Independent regulators have long voiced concerns over digital assets being used for illicit activities and their potential to disrupt financial stability.
The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the FDIC issued a joint statement in 2023 highlighting the “significant safety and soundness concerns” associated with crypto. These agencies had previously mandated that banks seek approval before launching major crypto-related initiatives. However, this restrictive approach is now being reconsidered.
Despite Trump’s pro-crypto stance, his administration has yet to appoint permanent heads for key regulatory agencies. The FDIC’s acting chair, Republican Travis Hill, is leading the charge on potential changes, while Biden-appointed OCC chief Michael Hsu is expected to be replaced soon. The Federal Reserve, led by Chair Jerome Powell, is likely to implement changes at a slower pace.
“The industry is working with policymakers to remove the guardrails in the banking system that kept banks out of crypto,” said Mark Hays, an associate director at Americans for Financial Reform, a Wall Street watchdog critical of the crypto sector.
Banks argue that they can implement robust safeguards to mitigate risks. They also contend that access to blockchain technology could help reduce costs, accelerate payments, and open new revenue streams.
JPMorgan Chase made initial inroads into the sector in 2019 by launching “JPM Coin,” an internal digital token for settling payments between institutional clients. Goldman Sachs, meanwhile, has explored blockchain-based platforms for trading real-world assets. Other financial giants, such as Citigroup, have collaborated with firms like Wellington Management and WisdomTree to experiment with tokenized private funds.
A report from the Bank Policy Institute, an industry lobbying group, argued that banks are “ideal vehicles for exploring the benefits of new technology like blockchain.”
Even if major banks deepen their involvement in crypto, the sector is unlikely to have a significant impact on their financial performance, which remains heavily tied to loan growth, net interest income, and balance sheets. However, traditional institutions have so far ceded lucrative services—such as brokerage, custody, and stablecoin issuance—to fintech and crypto firms like Coinbase and Anchorage Digital.
The success of spot-based Bitcoin exchange-traded funds (ETFs) has further fueled interest. Since their launch, these ETFs have amassed approximately $120 billion in assets, generating substantial fees for asset managers like BlackRock and Fidelity, as well as for Bitcoin custodians such as Coinbase.
Meanwhile, crypto firms have ventured into areas traditionally dominated by banks, including deposit-taking and lending. Stablecoins, digital tokens pegged to the U.S. dollar, have become a key component of the crypto economy, facilitating transactions and earning significant interest for issuers such as Circle and Tether. These stablecoins now represent a market worth over $227 billion.
To compete, some banks have reportedly held discussions with FDIC officials about introducing “tokenized deposits,” which would enable instant blockchain-based transactions linked to conventional checking and savings accounts. Proponents argue that such deposits could lower costs and improve efficiency for both traditional banking and crypto-related activities.
The FDIC, under Hill’s leadership, is now considering easing restrictions on banks providing crypto custody services. The agency is also exploring whether to relax previous guidance that required banks to obtain regulatory permission before engaging in crypto activities, opting instead for clearer upfront rules.
“We are actively re-evaluating our supervisory approach to crypto-related activities,” Hill stated on Wednesday, emphasizing the need for “a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles.”
Financial watchdogs caution that robust safeguards will be necessary to prevent a repeat of the 2022 market crash, which led to the downfall of several crypto-friendly banks, including Silvergate Bank and Signature Bank. The FDIC’s post-mortem report on Signature Bank attributed its collapse in part to an aggressive expansion into digital asset markets.
“Real people’s money is at stake,” said Shayna Olesiuk, director of banking policy at Better Markets, a financial industry watchdog. She pointed to the failures of Silvergate and Signature as evidence of the dangers posed by hasty crypto adoption.
Some financial stability experts believe, however, that integrating crypto within traditional banking could ultimately be beneficial. The failure of institutions like Silvergate was partly due to their heavy reliance on crypto deposits. If larger banks held such assets as a small portion of their overall liabilities, the risk of a systemic banking crisis might be reduced, argued Steven Kelly, associate director of research at the Yale Program on Financial Stability.
“If the crypto industry can mature and the regulations around it can mature enough, that’s a safer outcome than having institutions known as crypto banks,” Kelly said.
As Trump’s pro-crypto government takes shape, banks are eager to capitalize on digital assets. The president has signed an executive order to establish a crypto “working group” tasked with studying potential regulatory frameworks, including the possibility of a federal Bitcoin reserve. The Securities and Exchange Commission has also formed its own crypto-focused division, led by Commissioner Hester Peirce, known for her pro-industry stance.
Republicans in Congress are pushing for legislation to establish clear rules for stablecoins and crypto exchanges. They also express sympathy for crypto executives who claim they were unfairly “debanked”—denied access to basic banking services due to their industry affiliations.
“The Biden administration was explicit about not wanting crypto to touch the banking system, period,” said J.W. Verret, a law professor at George Mason University. “With Republicans, that war is over.”
