Fed Gives Nod to Crypto Banking—Bitcoin Primed for Liftoff?

Regulators just handed crypto its biggest banking win yet. The Federal Reserve’s greenlight means traditional banks can now dive deeper into digital assets—no more tiptoeing around custody services or balance sheet allocations.

Why Bitcoin stands to gain most

With institutional rails finally being laid, BTC’s liquidity and name recognition make it the obvious first port of call for risk-averse banks. Expect custody wars between Coinbase and legacy players like BNY Mellon to heat up.

The cynical take

Wall Street spent years dismissing crypto as a toy—now they’re scrambling to profit from the very asset class they mocked. Funny how nine-figure potential changes minds faster than any whitepaper.

This isn’t just about banking infrastructure—it’s the starter pistol for crypto’s next bull run. Whether that’s good news depends on which side of the trade you’re on.

Great for Bitcoin? 

The Fed’s shift and softer stance on banking support for crypto activities was well received by the industry. In fact, Michael Saylor, founder of Strategy (formerly MicroStrategy), viewed the move as a great for Bitcoin [BTC].

“Banks are now free to begin supporting Bitcoin.”

For his part, Alex Svanevik, CEO of blockchain analytics Nansen, said that the update was great for banks eyeing the stablecoin market. 

“Good news if you want big banks in the stablecoin game, and a sign that regulators are adjusting rather than outright blocking crypto integration.”

However, the Fed noted that regular banking oversight will still apply to crypto activities. 

“Board will no longer expect banks to provide notification and will instead monitor banks’ crypto-asset activities through the normal supervisory process.” 

However, Caitlin Long, founder of Custodian Bank, pointed out that the Fed didn’t rescind one anti-crypto guidance issued in 2023 via a Board vote.

She warned that it wasn’t over, but passing the stablecoin law could overturn the guidance. 

Source: Fed (excerpt of the 2023 guidance) 

That said, in March, the OCC (Office of the Comptroller of the Currency) was the first to signal a pro-crypto shift and stated that banks could handle crypto and stablecoins. 

Afterwards, the FDIC (Federal Deposit Insurance Corporation) followed suit and launched an investigation into the infamous crypto de-banking under the Biden Administration.

Under the Trump Administration, the sector has enjoyed much-needed regulatory relief.