The Federal Reserve's easing of regulations is not a whisper, but a rallying call; the flood of cryptocurrency in the banking industry is already on its way.
"As long as we understand and can manage the risks, banks are fully capable of servicing cryptocurrency clients." At the beginning of 2025, this seemingly plain statement from Federal Reserve Chairman Powell unexpectedly became the starting gun for the U.S. banking industry to aggressively enter the cryptocurrency world a few months later.
As an analyst who has been navigating the cryptocurrency industry for many years, I have witnessed the entire transformation of regulatory attitudes from strict prevention to embrace and acceptance. I must say, 2025 will become a watershed year for cryptocurrencies to integrate into traditional finance.
Currently, the Federal Reserve no longer considers 'reputational risk' as part of bank reviews; the intangible pressures that once forced banks to stop doing business with digital asset companies have dissipated.
01 Policy Turning Point: From 'Choke Point Action' to Full Embrace
Looking back at the regulatory journey of the past few years, it can be said to be a 'history of liberation' for cryptocurrencies. The Biden administration's 'Choke Point Action 2.0' cut off the financial services channel for the crypto industry by pressuring banks.
At that time, the Federal Reserve, FDIC, and OCC jointly issued a statement, clearly stating that issuing or holding cryptocurrencies on a public, decentralized network is 'highly likely to be inconsistent with safe and sound banking practices.'
In 2025, with Trump returning to the White House, the U.S. crypto regulatory environment will undergo significant changes. In April, the Federal Reserve rescinded its guidance requiring banks to obtain regulatory approval before engaging in crypto business.
A deeper transformation occurred in August when the Federal Reserve announced the formal cancellation of the 'Novel Activity Supervisory Program,' originally established in 2023 to closely monitor banks' involvement in cryptocurrency custody, lending, and stablecoin operations.
Cryptocurrency business is officially included in the category of conventional banking operations and is no longer seen as a 'new activity' that requires special regulation.
02 Banks Prepare: Wall Street Giants have sprinted into the market
The policy floodgates have just opened, and Wall Street bankers are already flocking in. America’s second-largest bank, Bank of America, has officially confirmed that it is actively preparing stablecoin products and considering cooperating with other financial institutions to jointly launch them.
Citibank views stablecoins as an important cornerstone for future international payments. Citibank CEO Jane Fraser has clearly stated that the bank is actively promoting stablecoin-related plans to address the pain points of high cross-border transaction fees and slow settlement.
JPMorgan has taken a substantial step by announcing the pilot launch of a deposit token called JPMD, deployed on the Coinbase-supported Base blockchain. This marks the first time a Wall Street giant has directly issued traditional bank deposits on-chain, signaling a critical step toward deep integration between traditional finance and the decentralized world.
Globally, Standard Chartered has announced that it will offer spot trading services for Bitcoin and Ethereum to its institutional clients, becoming the first systemically important bank to do so.
03 Capital Flow: How will trillions of dollars flood into the crypto market
The biggest impact of the Federal Reserve's policy shift is that it has removed the greatest barrier for traditional capital to enter the cryptocurrency market: regulatory uncertainty. Now, bank balance sheets are officially open to cryptocurrencies, which will change the funding landscape of the entire market.
According to a survey by Laser Digital, the crypto venture capital arm of Japan’s Nomura Securities, over 96% of institutional investors now recognize the value of cryptocurrencies and regard them as a diversification tool equivalent to traditional asset classes such as fixed income, cash, and stocks.
The Federal Reserve's report for the first quarter of 2025 shows that 46% of U.S. banks are already offering cryptocurrency-related services to clients, a significant increase from 18% in 2022.
The total assets of global sovereign funds exceed $50 trillion, and U.S. pension funds amount to $35 trillion. Even a very small allocation will bring in new capital inflows in the hundreds of billions.
More importantly, the stablecoin market is experiencing explosive growth. According to the latest data, by September 2025, the global stablecoin market size reached $307 billion, with USD stablecoins accounting for as much as 99.8%.
(GENIUS Act) After its implementation, the share of compliant stablecoins soared from less than 50% at the beginning of the year to 72%, with 100% reserves and licensed issuance becoming core access standards.
04 New Investment Landscape: Opportunities and Risks Coexist
In the face of this historic turning point, investors need to adjust their strategies. Banks’ participation in crypto business will bring about more complex product structures, while also potentially introducing new risk points.
The correlation between cryptocurrencies and traditional financial assets is strengthening. During the 'Triple Witching' period in September 2025, the crypto market saw significant volatility in sync with U.S. stocks, indicating that the correlation between the two is increasing. This correlation makes traditional risk models potentially ineffective, necessitating the development of more complex risk assessment frameworks.
For ordinary investors, the following opportunities can be considered: crypto bank stocks with good compliance progress; crypto custody service providers with strong technical capabilities; and diversified investments in different categories of crypto assets.
Bitcoin has shifted from being dominated by early miners to being led by institutions. Currently, various institutional investors hold about 8.96 million Bitcoins, accounting for 43%. As retirement funds and sovereign wealth funds enter the market, institutional holdings will continue to rise.
The challenges of technological security cannot be ignored. Private key management is the core risk point of crypto custody services. Banks need to establish military-grade key management systems, including the separation of hot and cold wallets, multi-signature, and distributed key management solutions.
05 Future Outlook: The Inevitable Trend of Crypto Financialization
The Federal Reserve's policy shift is just the beginning, and the integration of the crypto industry with traditional finance will accelerate. In the coming years, the crypto business of the U.S. banking sector will show a polarized pattern.
Large banks, leveraging their resources and technological advantages, will provide comprehensive crypto financial services, covering everything from custody and trading to lending and derivatives. Meanwhile, small and medium-sized banks may focus on niche markets.
Asset tokenization will become an important direction for banks' crypto business. The tokenization of U.S. Treasury bonds has surpassed $7.3 billion, and in the future, more traditional assets such as stocks, real estate, and artworks will be tokenized.
The relationship between banks and crypto-native enterprises will shift from competition to collaboration. Nearly 70% of bank crypto asset custody services are the result of collaborations between banks and native crypto companies, and this trend will further strengthen.
The application of regulatory technology will become increasingly widespread. The Federal Reserve is exploring the use of distributed ledger technology to build real-time regulatory systems, achieving near real-time monitoring of banks' crypto operations. This 'embedded regulation' model can greatly enhance regulatory efficiency.
The future has arrived, but it is not yet evenly distributed. The Federal Reserve's policy shift has triggered a crypto arms race among traditional financial institutions, with giants like JPMorgan, Bank of America, and Citigroup rushing to recruit talent and establish digital asset departments.
With banks getting heavily involved, the liquidity and stability of cryptocurrencies will see a qualitative leap, and volatility is expected to decrease, thereby attracting more conservative investors.
This transformation has just begun. When the banking system fully embraces cryptocurrencies, when every listed company can conveniently include Bitcoin on its balance sheet, and when pension and sovereign funds can freely allocate digital assets, we will face a completely different financial world.
The only question is: Are you ready?
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