Fed Opens Crypto Path for Banks Amid Regulatory Shake-Up
Traditional banks may soon find it easier to offer crypto-related services, following comments from Federal Reserve Chair Jerome Powell affirming that banks are free to engage in cryptocurrency activities—if they meet existing safety and risk standards.
Powell made the remarks during two days of congressional testimony, reflecting a clear shift in tone from past years of regulatory resistance.
Banks Given the Green Light Under Strict Conditions
Powell told the Senate Banking Committee on 25 June,
“It’s appropriate, it’s always been appropriate for banks to choose their customers and to be able to undertake activities as long as they’re safe and sound.”
He reiterated that the Federal Reserve is not blocking banks from entering the digital asset space, so long as they comply with consumer protection and risk management protocols.
This position aligns with recent updates in regulatory guidance from key bodies like the FDIC and the Office of the Comptroller of the Currency (OCC), which are now moving in coordination to create a more consistent framework around banks’ involvement in crypto.
Fed Ditches ‘Reputational Risk’ to Focus on Measurable Threats
One major development that’s helping clear the way: the Fed’s removal of “reputational risk” from its supervision guidelines.
Previously, banks engaging with crypto faced scrutiny based on the perceived social or political risks associated with digital assets.
Now, regulators are prioritising quantifiable financial risks over subjective reputational concerns.
This technical change, though subtle, is seen as critical in allowing banks to explore crypto-related services without fear of arbitrary pushback.
Revisiting Crypto Policies from the Biden Era
Powell also addressed growing calls to reverse older crypto-related policies issued under Section 9(13) of the Federal Reserve Act.
This section gives the Fed authority over state-chartered member banks and was used in January 2023 to issue a cautious policy statement declaring that issuing tokens on decentralised networks was likely “inconsistent with safe and sound banking practices.”
Speaking before Senator Cynthia Lummis, Powell confirmed that the Fed is reviewing and withdrawing several pieces of guidance issued during the Biden administration.
“The industry is maturing, our understanding of it is improving. And in a sense, it’s becoming much more mainstream.”
Congress Urged to Legislate on Stablecoins
Beyond the Fed’s internal actions, Powell called on lawmakers to establish a clear legal framework for stablecoins and other digital assets.
He told Congress on 18 June, backing recent bills that aim to bring clarity to how such tokens should be regulated and supervised,
“We need a framework for stablecoins.”
His public support for stablecoin legislation, coupled with his remarks on easing restrictions for banks, is being interpreted as a turning point in how federal regulators view the role of digital assets within the broader financial system.
Crypto Market Reacts to Signals from the Top
Markets responded with optimism following Powell’s testimony.
Bitcoin and other major digital currencies saw increased trading activity, reflecting growing investor confidence in the regulatory direction.
For banks and crypto firms alike, Powell’s comments are seen as a green light to deepen collaboration, especially in areas like digital asset custody, payments, and tokenised financial products.
A Test for the System or a Catalyst for Change?
If regulators stay the course, the blend of traditional finance and decentralised assets could accelerate faster than expected.
But the challenge ahead lies in how well institutions adapt to this new flexibility—and whether they can handle the risks without overreaching.
For now, the message from the Fed is clear: cautious permission is being replaced with conditional participation.
Hui Xin
Joy
Brian
Alex
Kikyo
BlockX