Bitcoin News Today: U.S. Banks Now Allowed to Offer Crypto Services Under Standard Rules

The U.S. Federal Reserve has announced a significant regulatory shift by easing constraints on banks' participation in cryptocurrency activities, marking a pivotal development in the evolving relationship between traditional finance and digital assets. Under the new supervisory framework, U.S. banks are now permitted to engage in crypto-related services—including custody, stablecoin issuance, and blockchain-based applications—provided they adhere to standard safety and soundness requirements. This change, effective from July, replaces the previous “novel activities” program that had imposed a specialized and more intensive regulatory lens on crypto activities [1].

The decision was formally outlined by Federal Reserve Chair Jerome Powell, who emphasized that banks are now free to participate in the digital asset market as long as they operate within existing regulatory guardrails. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have aligned with this approach, signaling a coordinated effort among U.S. financial regulators to normalize the treatment of crypto within the broader financial ecosystem [1].

This regulatory easing is expected to have immediate and lasting effects on the crypto market. Analysts anticipate an influx of institutional capital into cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and DeFi governance tokens, as banks begin allocating capital in accordance with their revised supervisory environment. The increased participation from major financial institutions may also result in higher liquidity, which could drive bullish market sentiment and price volatility [1].

Historical parallels suggest that such regulatory clarity often precedes price surges. For instance, the OCC’s 2020 approval for national banks to offer crypto custody services was followed by a notable increase in market activity and prices. This current shift may yield similar outcomes, especially as developers and institutional players respond to the newfound regulatory certainty [1].

However, the move has not been without caution. Critics have raised concerns about the risks associated with reduced specialized oversight, particularly given the unpredictable nature of crypto markets. While the Fed and other agencies argue that the updated approach better balances innovation with risk management, market participants are advised to remain vigilant in the face of ongoing volatility and potential future regulatory adjustments [2].

The broader policy shift is also reflective of the Trump administration’s ideological push toward deregulation and support for financial innovation. By integrating crypto supervision into standard regulatory practices rather than maintaining a separate framework, the administration has taken a step toward fostering a more business-friendly environment for digital assets. This includes proposals for a strategic Bitcoin reserve and legislative reforms aimed at encouraging technological advancement in the financial sector [4].

For U.S. banks, the implications are both opportunities and challenges. The reduction in compliance burdens may encourage greater adoption of crypto services, but institutions must also manage the inherent risks—ranging from cybersecurity threats to market turbulence. As the Fed continues to refine its oversight model, banks will need to adapt their internal risk management strategies to align with the updated regulatory expectations [1].

Sources:

[1] https://www.bankingexchange.com/news-feed/item/10389-federal-reserve-eliminates-specific-program-to-police-crypto-and-fintech-initiative

[2] https://news.vocofm.com/en/daily/156767/

[3] https://indianexpress.com/article/business/why-us-fed-decided-to-stop-crypto-focused-supervision-of-banks-10193159/

[4] http://www.msn.com/en-in/news/India/why-did-the-fed-scrap-the-dedicated-crypto-oversight-unit/ar-AA1KCMaw?apiversion=v2&batchservertelemetry=1&domshim=1&noservercache=1&noservertelemetry=1&ocid=finance-verthp-feeds&renderwebcomponents=1&wcseo=1