Cryptocurrency has been enjoying its time in the spotlight, as lawmakers empowered by the pro-crypto Trump administration work to build a more welcoming environment for digital-asset players to access financial services. But legislators across the aisle remain conflicted on whether the regulators or the institutions themselves are to blame for past friction.
The term
During a hearing this month, Republican officials held that regulators with the Federal Deposit Insurance Corp. and other agencies were responsible for stifling bank activity in the digital-asset arena. Bank advocates say recent executive appointments have opened the door to providing clarity on just how involved institutions can be with crypto.
Chris Brodersen, managing director of blockchain and digital assets at EisnerAmper, said the choice of David Sacks as "crypto and AI czar" and Mary Uyeda as the acting director of the Securities and Exchange Commission are signs of change.
"Simply having someone formally in this role is a positive message to the industry, that there is someone who will focus on helping key regulatory agencies such as the SEC and CFTC create more industry-friendly policies," Brodersen said. "This also means the previous 'regulation by enforcement' approach at the SEC will likely come to an end."
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Alongside the hearings, lead officials with the FDIC published more than 170 documents showcasing conversations from banks to the agency about engaging with cryptocurrencies and asking for regulatory clarity on what actions are allowed.
The release was the latest in an ongoing
FDIC Acting Chair Travis Hill and experts with the American Bankers Association were in agreement that the documents showed how the agency's reserved attitude towards crypto was detrimental to banks' operations.
"The documents recently released by the FDIC and recent testimony in Congress demonstrate how guidance and policy statements from prudential regulators over the last four years have discouraged banks from pursuing business in the digital asset market," Brooke Ybarra, senior vice president of innovation and strategy at the ABA, said.
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These developments come in the wake of President Donald Trump's "Strengthening American Leadership in Digital Financial Technology"
Digital-asset experts from law firms like Freshfields and Venable LLP say the steps to building such a foundation require increased regulatory clarity and an understanding of the role banks could play in the crypto landscape.
David Sewell, a partner at Freshfields, said that for the executive order to truly be effective, the U.S. needs to adopt a comprehensive framework for digital-asset regulation "so that companies, and the banks that want to serve them, have clarity and certainty about what they can and can't do."
Sewell added: "The prudential banking regulators walk back the expectation that banks demonstrate to a certainty their customers' compliance with laws that, in some cases, are practically impossible for crypto companies to satisfy."
But defining the scope of the cryptocurrency industry and trying to determine where and how it could fit within the banking system has long been a challenge for regulators, according to Venable LLP Banking and Financial Services Partners Andrew E. Bigart and Chris Boone.
Read on to learn more about the latest developments between regulators and policymakers over how to answer the crypto questions looming across the banking industry.
Results from the Capitol Hill's debanking debunked hearing
Claims are rife of banks parting ways with customers whose political views or involvement with digital assets conflict with the obligations to regulators — and Republican lawmakers are placing the blame on regulators.
During the Jan. 5 Senate Banking Committee hearing, Sen. Thom Tillis, R-N.C., who chairs the subcommittee on financial institutions, said if a banker is determined to "do a bank that only banks blond-headed, blue-eyed people, and there's a market opportunity for that and a growth strategy, knock yourself out."
Other Republican changemakers on the committee like Sen. Mike Rounds, R-S.D., echoed Tillis' view to say "these banks want to look for business but because of a regulatory environment that they have been in, they have been forced to decide whether they want to do business with certain types of industries."
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FDIC releases trove of bank communications supporting crypto lag
Lead officials with the Federal Deposit Insurance Corp. on Jan. 5 released a host of documentation between the agency and regulated banks which many say are evidence of the FDIC's stance against engaging with cryptocurrency.
More than
"The documents that we are releasing today show that requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity," Travis Hill, acting chair of the FDIC, said in a statement.
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"We're not against innovation": Powell supports lawful crypto customers
Amid the rising tide of debanking concerns among crypto advocates, Federal Reserve Chair Jerome Powell said the risks associated with cryptocurrencies shouldn't be driving regulators to in turn push banks to drop customers who own or transact with digital assets.
"We're not against innovation," Powell said during a Federal Open Market Committee press conference in January. "And we certainly don't want to take actions that would cause banks to, you know, terminate customers who are perfectly legal just because of excess risk aversion, maybe related to regulation and supervision."
Powell further clarified that banks are "perfectly able" to meet the needs of consumers so long as they comply with anti-money-laundering and Bank Secrecy Act requirements, but the risk threshold for banks engaging directly with cryptocurrencies is more nuanced.
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Trump's executive order includes banking service mandate for crypto firms
President Trump's "Strengthening American Leadership in Digital Financial Technology"
Under the order, a small group of specialists within the National Economic Council will join together as members of the President's Working Group on Digital Asset Markets and consist of the Secretary of Commerce, Secretary of the Treasury, Attorney General and other notable political figures or those they designate in their place.
While standard cryptocurrencies and dollar-backed stablecoins are viewed positively in the order,
"It is therefore the policy of my Administration to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy, including by … taking measures to protect Americans from the risks of Central Bank Digital Currencies (CBDCs), which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States," the order states.
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Pro-crypto Trump mints his own memecoin. What's next?
Prior to the inauguration, President Trump and first lady Melania Trump debuted their eponymous take on cryptocurrency by minting TRUMP and MELANIA meme coins. Both of these debuted with optimism but have since lost their luster.
That's partially due to the nature of that category of crypto, which pulls a significant amount of its value from the personas or concepts they're based on — and is just as volatile.
"The way I would describe it is they're collectors' items. That's where people get involved: They get excited about the hype — the president has just been elected and they want to participate in any way they can," Rob Krugman, chief digital officer at Broadridge, told American Banker's
Krugman hypothesized that there could be a payments use case to be made for the coins in the future, driven by "a community of holders."
