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Regulators Clear a Path for Banking Crypto

/ May 16, 2025 / Gordon B. Russell and Michael Desmond

On April 24, 2025, the Federal Deposit Insurance Corporation (“FDIC”) and the Federal Reserve Board of Governors (the “Board of Governors”) issued a notice withdrawing two prior joint statements on “crypto-asset-related activities.” This is the latest activity from banking regulators in recent months to ease restrictions on how banks can transact in matters relating to cryptocurrencies and other blockchain-related assets.

The regulatory regime supervising bank activities has historically been unfavorable to cryptocurrency. In 2022, the FDIC issued Financial Institution Letter FIL-16-2022 which required that any FDIC-supervised institution engaging or seeking to engage in “crypto-related activities” must first notify the FDIC. In January and February of 2023, the FDIC and the Board of Governors issued two joint statements regarding crypto-related activities and the risks associated with providing banking services to the firms conducting such activities. These joint statements were aimed at ensuring that “risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.” These statements included cautionary guidance regarding accepting deposits of dollars from stablecoin or crypto-related companies due to the risk of volatility in crypto markets and the perception of corresponding volatility in those deposits at regulated financial institutions.

On March 28, 2025, the FDIC issued FIL-7-2025, rescinding FIL-16-2022 and clarifying that financial institutions are free to engage in “crypto-related activities” without prior notification to regulators provided that banks continue to follow safe and sound practices with respect to such activities.

FIL-7-2025 defines “crypto-related activities” as activities which include but are not limited to: acting as crypto-custodians; acting as market makers or exchange or redemption agents; participating in blockchain or distributed ledger-based settlement or payment systems, as well as finder activities, and, of course, extensions of credit by federally insured and regulated financial institutions.

As of April 24, 2025, the two joint statements issued by the FDIC and the Board of Governors in 2023 have also been withdrawn. The press release announcing the withdrawal indicates that the intent is to “provide clarity that banking organizations may engage in permissible crypto-asset activities and provide products and services to persons and firms engaged in crypto-asset related activities.” It also emphasizes again that all such activities should be consistent with standards of safety and soundness applicable to federally insured financial institutions as well as applicable laws and regulations.

How financial institutions will weigh the risk of crypto-asset related firms as potential depositors and borrowers remains to be seen, but between these developments and the ongoing adoption of the 2022 Amendments to the Uniform Commercial Code, it appears that both legislators and regulators are becoming more favorably disposed to allowing the world of crypto-related activities into the traditional banking space.

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