In April 2025, the landscape of U.S. crypto regulation shifted significantly. Three of the country’s principal bank regulators – the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) – jointly moved to relax or rescind longstanding restrictions on banks engaging with digital assets. While not a wholesale embrace of the crypto ecosystem, the coordinated action marked a notable recalibration of supervisory posture, opening new pathways for innovation in financial services.
After years of fragmented and reactive oversight, the federal banking agencies now appear poised to incorporate select crypto activities into the regulated banking system. In a new article, I examine the causes of this shift, its implications for regulated financial institutions, and the unresolved risks that merit continued vigilance.
From Defensive to Integrative Regulation
Since Bitcoin’s emergence in 2009, U.S. regulators have struggled to define their role in overseeing digital assets. By the early 2020s, the regulatory terrain was defined more by turf battles than clarity. The Securities and Exchange Commission (SEC), OCC, FDIC, and Federal Reserve often issued conflicting guidance, leaving market participants uncertain about permissible activities. Enforcement actions filled the void left by absent rulemaking.¹
This ambiguity deepened between 2021 and 2024 under the Biden administration. Agencies took divergent approaches to stablecoins, custody services, and decentralized finance (DeFi), resulting in a patchwork regime that discouraged banks from adopting these technologies.² The fragmented landscape persisted despite the growing sophistication of crypto markets and infrastructure.
The election of President Trump in 2024 brought a more industry-aligned regulatory philosophy. By early 2025, the OCC had rescinded a requirement that national banks obtain assurances that regulators did not object before offering crypto custody services.³ The FDIC followed with parallel relief for state-chartered nonmember banks, allowing engagement with crypto activities so long as risk management protocols were robust.⁴ Meanwhile, the SEC signaled a more accommodative approach to crypto custody via interpretive guidance under SAB 122, easing prior accounting burdens that had deterred traditional custodians.⁵
The coordinated actions in April 2025 solidified this change. All three agencies revised or withdrew earlier statements that had emphasized caution. Instead, they now allow supervised banks to engage in crypto-related activities provided they meet requirements related to operational resilience, cybersecurity, and anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance.⁶
Motivations Behind the Shift
This policy turn reflects more than mere political transition. It stems from a confluence of technological, competitive, and geopolitical factors.
First, digital asset infrastructure has matured. Institutional-grade custody, settlement, and compliance tools now exist at a level that banking supervisors can credibly evaluate. The OCC’s earlier doubts about safe custody of private keys, for example, have been mitigated by industry advances and custodial insurance.⁷
Second, U.S. banks faced competition from international peers. Jurisdictions such as the United Kingdom, Singapore, and Switzerland have adopted regulatory frameworks that permit licensed institutions to offer crypto services. Without similar clarity, U.S. banks risked disintermediation in global markets.
Third, the geopolitical dimension loomed large. Following heightened tensions with China and decreasing use of the dollar in the Global South, federal agencies have grown more receptive to blockchain-based tokenization of dollar-denominated assets as a tool of financial diplomacy.⁸
Finally, political realignment played a role. The current administration has prioritized domestic technological leadership and deregulation. Its regulators favor industry engagement and pragmatism, particularly when coupled with safeguards.
Scope of Permitted Activities
Under the revised guidance, supervised banks may now participate in three broad categories of crypto activity:
- Custody Services: Banks may provide safekeeping of crypto assets, including cold storage, for institutional clients. While no federal mandate requires this function, regulators have clarified that custody itself is not inherently unsafe with appropriate internal controls.⁹
- Stablecoin Activities: Banks may issue, redeem, and manage stablecoin reserves under certain conditions. Though the legal treatment of stablecoins remains under debate at the federal level, their economic function as digital settlement assets aligns with traditional banking activities.¹⁰
- Blockchain Infrastructure: Banks may experiment with distributed ledger technology (DLT) to streamline internal processes such as clearing, settlement, and payments. Several institutions are already testing tokenized deposits and programmable payments through permissioned blockchains.¹¹
Notably, the agencies have not endorsed speculative trading or proprietary investments in crypto assets. The revised approach supports integration of digital assets into banking functions, not speculative finance.
Unresolved Risks and Prudential Gaps
Despite this more permissive stance, material risks persist. Crypto-related services can expose banks to new forms of operational, liquidity, and legal risk.
Cybersecurity remains a critical concern. Crypto platforms, including those operated by banks, are frequent targets of sophisticated attacks. The integration of public-private key infrastructure adds technical risk that many banks are still learning to manage.¹²
AML and CTF compliance presents another unresolved challenge. Peer-to-peer transfers across pseudonymous blockchains complicate transaction monitoring and reporting. Regulators have reaffirmed that banks must meet Bank Secrecy Act requirements, but implementation remains uneven.¹³
Liquidity risk also warrants caution. For example, the redemption of stablecoins during market stress can create sudden outflows, forcing banks to rapidly liquidate reserve assets. Without standardized reserve composition rules, this risk remains difficult to model or mitigate.¹⁴
Moreover, interagency coordination is still underdeveloped. Although the April 2025 revisions reflected alignment, the OCC, FDIC, and Federal Reserve have varying supervisory resources and risk appetites. A durable regulatory regime will require ongoing coordination.
A Path Forward
The emerging approach represents a pragmatic compromise: Permit regulated integration while maintaining baseline guardrails. But to succeed, several enhancements are necessary.
First, a dynamic supervisory framework is needed. As crypto markets evolve, static rules will quickly become obsolete. Agencies should emphasize principles-based guidance tied to functional outcomes, such as asset segregation, fraud prevention, and client disclosure.
Second, differentiated compliance standards may be appropriate. Large, systemically important institutions warrant stricter oversight than community banks experimenting with niche tokenization. Tailored supervision can promote innovation without systemic risk.
Third, interagency cooperation must deepen. The Financial Stability Oversight Council (FSOC) could play a useful coordinating role, especially as stablecoin and tokenization activities span multiple regulatory domains.
Finally, international alignment remains vital. The Financial Stability Board (FSB) and the Basel Committee on Banking Supervision are developing global standards. U.S. regulators must participate to ensure that domestic rules reflect cross-border realities.
Conclusion
The April 2025 shift by U.S. banking regulators marks a significant recalibration of crypto oversight. Rather than seeking to wall off digital assets from the banking system, federal agencies now seek to supervise their integration through prudential norms. This approach reflects both market realities and policy pragmatism.
Yet the move is not without risk. Sound supervision, technological due diligence, and compliance enforcement will be essential to ensure that integration does not imperil financial stability. The challenge is not whether banks should engage with digital assets, but how to ensure they do so responsibly.
ENDNOTES
¹ See, e.g., U.S. Sec. & Exch. Comm’n, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (July 25, 2017), https://www.sec.gov/litigation/investreport/34-81207.pdf.
² See J.B. Harvey et al., DeFi and the Future of Finance (2021).
³ Office of the Comptroller of the Currency, Interpretive Letter 1179 (Jan. 2025).
⁴ Fed. Deposit Ins. Corp., Financial Institution Letter 2025-06 (Mar. 2025).
⁵ U.S. Sec. & Exch. Comm’n, Staff Accounting Bulletin No. 122 (Revised) (Feb. 2025).
⁶ ABA Journal, Agencies Ease Crypto Rules, 112 A.B.A. J. 48 (Apr. 2025).
⁷ See David Krause, Regulatory Recalibration: U.S. Banking Agencies’ Shift Toward Crypto Integration (2025).
⁸ Id.
⁹ OCC Interpretive Letter 1179, supra note 3.
¹⁰ Fed. Reserve Bd., Tokenization and Payments: Emerging Trends (Apr. 2025).
¹¹ Id.
¹² See FATF, Targeted Update on Implementation of the FATF Standards on Virtual Assets (2024).
¹³ Id.
¹⁴ See FSB, Global Stablecoin Arrangements: Recommendations for Regulation (2023).
This post comes to us from David Krause, an associate professor of practice emeritus at Marquette University’s College of Business Administration. It is based on his recent article, “Regulatory Recalibration: U.S. Banking Agencies’ Shift Toward Crypto Integration,” available here.