U.S. Regulators Allow Banks to Offer Crypto Custody Services

U.S. federal banking regulators, including the OCC, FDIC, and FRB, have issued revised guidance in April 2025, permitting banks to engage in crypto custody and related services. This revision aims to restore prior flexibility for banks while emphasizing risk management compliance, potentially accelerating institutional interest in crypto services. The new guidance overturns previous restrictive policies, allowing banks to offer crypto custody without prior approval, provided they manage risks and comply with regulations. This marks a return to previous crypto-friendly policies.

The three federal regulators have removed prior barriers by revoking restrictive letters. This includes the Federal Reserve monitoring crypto activities through their normal supervisory process rather than through separate procedures. Banks may experience improved autonomy under these new guidelines, allowing them to engage more vigorously in crypto activities. This newfound capacity to offer a wider range of services could lead to increased institutional investment in digital assets.

The impact on financial markets could be notable, as banks, now able to hold assets like BTC and ETH, can facilitate greater involvement in the crypto economy. Observers anticipate a potential stimulus to market liquidity. Potential outcomes include heightened institutional engagement in digital currencies. Historical precedents show regulatory relaxation fosters increased market activity. Insights from past shifts support this outcome, as banks broaden offerings and risk management precedents evolve.

U.S. regulators have taken a significant step forward in integrating cryptocurrencies into the traditional banking system by allowing banks to offer crypto custody services. This move, outlined in a joint statement from the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), permits banks to hold digital assets on behalf of their customers. Previously, regulatory uncertainty had prevented banks from entering the crypto custody space, which had been dominated by specialist firms.

The new guidelines clarify that banks can provide a range of services related to cryptocurrencies, including stablecoin reserves and blockchain-based payment solutions. This shift is expected to enhance trust and security in the crypto market, as banks will be required to establish robust internal controls to manage risks associated with digital assets. Banks must control cryptographic keys and assess risks, ensuring compliance with existing regulations.

The OCC, in particular, has been proactive in advancing key priorities related to cryptocurrencies. Interpretive Letter 1183, issued on March 7, 2025, confirmed that banks can engage in crypto-asset custody, certain stablecoin activities, and participation in independent node verification networks. This letter provides a clear framework for banks to operate in the crypto space while adhering to regulatory standards.

FDIC-supervised banks, including regional institutions and state non-member banks, are now authorized to offer crypto custody services. This expansion of services is part of a broader effort to integrate cryptocurrencies into the traditional financial system, potentially leading to increased adoption and innovation in the sector. Banks can hold crypto in either a fiduciary or non-fiduciary capacity, depending on the specific arrangements with their customers.

The guidance issued by the regulators emphasizes the importance of compliance and security in digital asset custody. Banks are required to implement stringent measures to protect digital assets and ensure that they are managed in accordance with regulatory requirements. This initiative is expected to foster greater trust in the crypto market, as banks bring their established risk management practices to the custody of digital assets.

Overall, the decision by U.S. regulators to allow banks to offer crypto custody services marks a significant milestone in the evolution of the crypto industry. By providing a clear regulatory framework, banks can now safely and securely enter the crypto custody space, potentially leading to increased adoption and innovation in the sector. This move is expected to enhance trust and security in the crypto market, as banks bring their established risk management practices to the custody of digital assets.