Fed Drops Crypto Handcuffs—Banks Now Free to Play With Digital Fire

The Federal Reserve just greenlit banks to dive headfirst into crypto—no life jackets required. After years of regulatory constipation, the gates are open. Expect a gold rush of institutional money flooding into Bitcoin, Ethereum, and whatever speculative token Wall Street can repackage as ’innovation.’

Banks wasted no time. JPMorgan reportedly spun up a crypto custody division before the ink dried. Meanwhile, retail traders brace for the inevitable pump-and-dump schemes dressed in three-piece suits. Because nothing screams ’financial revolution’ like letting too-big-to-fail institutions corner another volatile market.

Remember: When the Fed ’embraces’ disruptive tech, it usually means they’ve found a way to tax it. Happy trading.

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Background: from overregulation to deregulation

The original guidelines, introduced under the Biden administration, required banks to obtain approval before investing in crypto assets or stablecoin projects. These measures were criticized as part of the so-called “Operation Choke Point 2.0,” an unofficial strategy aimed at excluding crypto companies from the traditional banking system. Documents from the FDIC and statements from industry representatives support these allegations.

The Federal Reserve’s decision to lift its restrictive guidelines on banks’ crypto activities not only marks a political shift but also has immediate implications for institutions previously affected. A prominent example is Custodia Bank, a Wyoming-based financial institution specializing in digital assets. In 2023, the Federal Reserve denied Custodia access to the payment system, which was seen as part of the unofficial “Operation Choke Point 2.0.” This action prevented the bank from performing basic financial services such as check clearing or securities transfers.

With the current deregulation, banks could now once again attempt to gain full access to the traditional financial system, representing a significant step toward integrating crypto firms into the regulated banking sector.

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Political shift under Trump

The repeal of the guidelines aligns with President Trump’s promise to make the US the leading Bitcoin nation. As early as March, Trump had announced plans to dismantle regulatory hurdles for crypto companies and establish clear frameworks for stablecoins. The Federal Reserve’s latest decision is seen as a step in that direction. With deregulation, banks may now increasingly enter the crypto sector, potentially leading to greater integration of digital assets into the traditional financial system.