US Regulators Ease Banking Restrictions on Cryptocurrencies

TLDR

• Regulators affirm banks can engage in crypto-asset custody.
• New guidance removes prior limitations on crypto activities.
• Legislative actions support banks’ entry into crypto services.

The United States federal banking regulators have eased the restrictions on banks’ involvement with cryptocurrencies. The Federal Reserve (FRB), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) issued guidance in 2025 affirming that banks can engage in crypto-asset custody, fee payments, and related activities. This action marks a shift from previous regulations that limited such engagements.

The guidance is part of a series of regulatory adjustments made between April and December 2025. These changes remove prior limitations and confirm banks’ ability to handle crypto assets. The regulators emphasized adherence to safety-and-soundness standards. No singular announcement declared the full capacity for banks to buy, sell, and custody crypto, but the cumulative actions signal such a capacity is now permitted.

Regulatory Updates and Responsible Innovation

Key figures in these regulatory changes include Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, who supported rescinding the 2023 guidelines. In a recent statement, Bowman noted these adjustments aim to support innovative financial products while ensuring the banking sector remains safe and modern. Michael S. Barr, a Governor at the Federal Reserve, dissented, expressing concerns about potential regulatory arbitrage risks.

Commissioner Hester Peirce of the SEC, though not a banking regulator, was also influential in this space, particularly focused on digital asset custody for broker-dealers. Known for advocating innovation, Peirce highlighted the SEC’s intention to facilitate digital asset custody within the industry. Caroline Pham, Acting Chair of the CFTC, introduced a pilot allowing Bitcoin, Ether, and USDC as margin collateral, further enabling custody-like functions.

Impacts on Assets and Legislative Support

The regulatory changes primarily affect Bitcoin (BTC), Ether (ETH), and USD Coin (USDC). These assets may benefit from increased institutional investment as banks diversify into crypto services. The CFTC’s December pilot could indirectly encourage the use of BTC and ETH as collateral in derivatives. No TVL changes, liquidity shifts, or staking flows were reported from these developments.

Several legislative actions align with these regulatory updates. In July 2025, a joint statement from FRB, FDIC, and OCC addressed crypto-asset safekeeping risks. An earlier update in April 2025 from the FRB rescinded the 2022 guidance that required banks to pre-notify before engaging in crypto activities. Such updates reflect an evolving supervisory approach in line with technological advancements in the financial sector.

Industry and Community Reactions

The official announcements have yet to spark substantial public commentary from major crypto key opinion leaders (KOLs). Figures like Arthur Hayes, CZ, and Vitalik Buterin had not publicly reacted by the time of this article’s publication. Similarly, there were no significant statements from popular figures on social media platforms associated with the changes.

The OCC confirmed the permissibility of banks to hold certain crypto-assets and process network fees in their November 2025 news release. This update aligns with ongoing regulatory shifts aiming to foster innovation while maintaining strict oversight. The Federal Reserve’s actions in December 2025 further ease the path for non-FDIC banks to enter the crypto space. The CFTC provided a no-action relief for digital asset collateral, further defining the regulatory landscape.

Additional information on these regulatory developments can be accessed through a tracker of U.S. cryptocurrency regulatory developments. Further details on 2025’s legislation concerning cryptocurrency can be explored here.

Future Outlook for Institutional Crypto Adoption

As regulations ease, banks may have greater flexibility to allocate capital to crypto services. While no direct funding impacts such as grants or structured allocations have been reported, the regulatory changes support continued innovation. Banks may now proceed with crypto-related activities under normal supervision without pre-notification, potentially enhancing institutional adoption.

Although the shifts in policy have not yet influenced on-chain data such as total value locked or liquidity, they reflect increased willingness among regulators to integrate blockchain technologies into traditional financial systems. As a result, banks could emerge as prominent players in the crypto asset space, offering new services aligned with the evolving digital economy.