With the Trump administration signaling enthusiastic support for digital assets, banks can start evaluating the pros and cons of letting clients buy and sell crypto. Recent policy shifts — including a crypto-friendly executive order and recent moves by the U.S. Securities and Exchange Commission — suggest a more favorable regulatory environment.
While the executive order failed to pave the way for a U.S. central bank digital currency (CBDC), it promotes stablecoins, self-custody, and crypto mining while ensuring open banking access for crypto-related activities. It also establishes a working group on digital asset markets to propose regulatory frameworks and explore a national digital-asset stockpile. Finally, it aims to ensure fair banking access for crypto-related activities.
Additionally, the SEC rescinded Staff Accounting Bulletin No. 121, or SAB 121, which had required banks safeguarding crypto assets to recognize liabilities on their balance sheets. The repeal reduces financial reporting burdens, making crypto asset custody more feasible for banks.
The executive order’s push to “promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide” presents an opportunity to streamline money movement and cross-border transactions.
Several Republican lawmakers have vowed to pass stablecoin legislation in the Trump administration’s first 100 days in a move that could potentially accelerate adoption, while Brian Moynihan, Bank of America Corp.’s chairman and CEO, recently stated that the bank would launch a stablecoin if doing so becomes legal.
These actions are expected to give consumers, and the financial services companies that serve them, a bit more confidence to evaluate — or in some cases, reevaluate — dipping their toes into crypto and other digital assets. Here are some thoughts on how banks should evaluate the business.
Rethinking Crypto
After the November 2022 collapse of the crypto exchange FTX and the voluntary liquidation of Silvergate Bank in 2023, which banked crypto businesses, several banks retreated from crypto, citing counterparty risk and regulatory scrutiny. Metropolitan Bank Holding Corp. in New York exited the crypto-asset business in 2023, while Vast Bank in Oklahoma, a trailblazer in the field, disabled and removed its crypto mobile banking app the following year.
Very few banks have shown an interest in crypto in recent years. A survey of 370 community bankers conducted by the Conference of State Bank Supervisors between April 15 and July 15 of last year found that 93% had no plan to offer crypto services over the next 12 months.
Still, the tide has started to change on the regulatory front.
Federal regulators have recently received scrutiny for what some critics called Chokepoint 2.0, where banks were seemingly pressured to limit relationships with digital asset firms due to concerns about financial stability and illicit finance risks. The Trump administration’s new policy direction suggests a rollback of these restrictions, which would give banks more flexibility to let clients buy, sell and hold crypto.
Federal Reserve Chairman Jerome Powell recently stated that banks should consider letting customers hold digital assets, though they should be cautious about issuing their own coins. This evolving regulatory clarity offers banks a path to explore crypto services responsibly.
The Argument in Favor of Crypto
Banks’ participation is critical for the advancement of digital assets. Continued research and development on blockchain technology is expected to advance banking innovation. But there is also a competitive element to the decision to offer cryptocurrency services.
David Foss, executive board chair at Jack Henry & Associates, says that, regardless of where banks stand on crypto, customer demand is growing. Ignoring digital assets could lead to deposit outflows as customers return to external crypto exchanges, fintech platforms and banks that enter the business.
“If your customers want this, are you going to put your head in the sand and say we’re not going to deal in it? Or are you going to come up with some kind of plan that at least offers them an option and maybe a safer option — because you’re there to help them understand the risks?” Foss says.
Rather than avoiding crypto, banks can leverage their role as trusted financial intermediaries to provide customers a safer way to transact with digital assets. Allowing customers to use third-party fintech firms that offer crypto services can minimize direct exposure to volatility and compliance risks.
For now, it makes the most sense for banks to act as a financial intermediary, letting clients buy and sell crypto, rather than acting as a custodian and storing it for customers, industry experts said.
Over time, there may be other ways to leverage the platforms, including using crypto’s underlying value as collateral for lending, says Larry Pruss, a managing director at consulting firm Strategic Resource Management.
“I think there’s an opportunity here, but it’s going to be complicated for financial institutions to grasp this stuff, get ahead of it and leverage it,” Pruss cautions. “I think all the big financial institutions have a good understanding of it. … Community banks and credit unions might be blindsided a bit and will have to figure out what their role will be in all of this.”
Key Risks and Precautions for Banks
While the regulatory environment is shifting, substantial underlying risks remain.
Mike Butler, CEO of Grasshopper Bank in New York, which has a banking-as-a-service platform that works with a variety of fintechs, urges caution. He suggests that banks take a careful approach and ensure they have a well-defined business model before diving in. There will also be significant compliance costs in areas such as the Bank Secrecy Act and anti-money laundering rules.
“You’ve got to understand the path to profitability, and you’ve got to do it right,” Butler says. “Just because the government says you can do it doesn’t mean it’s going to be profitable. The reality is that … the controls aren’t going to go away.” Despite current excitement, all it takes is a high-profile misstep or a crisis to cause a course correction in Washington, with the FTX implosion in 2022 serving as a prime example. For that reason alone, banks should have a clear idea of when, and how, to pull the plug if necessary.
“Banks need a clear exit or wind-down strategy before committing to crypto offerings,” Foss says.
“There are tricks and traps that have occurred over the years where the government has opened and then closed doors,” Butler adds. “I always like to say that I don’t want to follow an opportunity the government gives me because what they give us, they can also take away.”
To be sure, some parameters must be established so banks understand the rules of the road.
“I think all of us who want to see this ecosystem survive need to know that the new administration will not remove all the guardrails,” Pruss says. “You need a market structure to allow for broader dealings in crypto.”
Risk management is another key consideration for crypto-curious banks. Facilitating dealings in digital assets remains a complex and volatile business, and fraudulent activities remain a concern. Foss stresses choosing third-party partners wisely, only working with those that comply with federal banking regulations and have a strong risk management track record.
“Picking the right partner is crucial,” Foss advises. “You don’t want to expose your institution to unnecessary regulatory or operational risks.”
Along those lines, customer education and transparency are important to avoid regulatory and reputational hits. Many consumers are relatively unfamiliar with the differences between stablecoins tied to a fixed asset, such as fiat currency, and speculative crypto, so banks must provide clear disclosures to prevent uninformed financial decisions. Also, in the past, stablecoins have fallen below the value of their pegged assets on multiple occasions, according to Moody’s Investors Service.
“This is not just about allowing transactions; it’s about guiding customers through a complex and often misleading market,” Foss says.
Banks also need to think about cybersecurity and custody concerns. Digital currencies could be vulnerable to hacking and cyber theft despite embedded safeguards. Banks must invest in secure custody solutions or partner with firms specializing in crypto-asset security. One breach can destroy trust and lead to major financial losses. A recent crypto theft moved a reported $1.5 billion worth of tokens out of an exchange, according to Bloomberg.
Taking a Strategic Approach to Crypto
Banks that are interested in facilitating crypto transactions should begin the educational process immediately, as implementing a platform to allow customers to buy and sell crypto could take more than a year. “Don’t wait a year to start planning — this isn’t something that happens overnight,” Foss says.
“Between regulatory compliance, technology integration, and customer education, it will take some time for banks to get a secure and well-structured crypto offering up and running,” Foss adds. “Starting the conversation now is critical to being prepared when demand accelerates. If you’re going to even go down this path, you should at least be having the conversations.”
While crypto services may not yet be a major profit driver — and they may never lead to significant revenue — they could help some banks retain certain customers. They could limit deposit outflows to exchanges and banks that decide to let people buy and sell crypto. As regulations stabilize, early adopters in banking could gain a competitive edge by offering compliant, customer-friendly crypto solutions.
The next few years will determine how deeply banks integrate digital assets into their financial ecosystems. The key to success will be thoughtful planning, risk assessment and customer education, ensuring that crypto-related offerings align with long-term business objectives rather than short-term trends.
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