TLDR
- The Federal Reserve and the SEC have begun dismantling restrictions and lowering the regulatory cost that had limited integration between banks and cryptocurrencies.
- The Fed withdrew a 2023 policy and allowed insured and uninsured banks to engage in crypto activities under standard supervisory controls.
- The SEC provided clarity on asset custody. However, the market and Bitcoin have yet to capitalize on these changes.
The Federal Reserve and the SEC have started to roll back, quietly but in a coordinated manner, several restrictions that over the past two years had constrained the relationship between the U.S. financial system and digital assets. The shift is not driven by new rules, but by the removal of earlier frameworks that had raised the regulatory cost of any exposure to the crypto sector.
The Federal Reserve withdrew a 2023 policy that discouraged supervised banks from engaging in crypto-related activities. In its place, it allowed both insured and uninsured institutions to operate in this segment under the same supervisory and risk-control standards applied to their other businesses. This removes the need for special approvals and normalizes banks’ access to services such as custody, tokenized deposits, settlement infrastructure, and the provision of crypto access to clients.
Improved Bank Access to the Crypto Market
The most significant change is conceptual. In one of its latest communications, the Fed stopped treating blockchain technology as a primary source of risk and began describing it as a tool with the potential to improve the efficiency of financial products and services. This sharp shift in language changes how compliance and risk teams inside banks evaluate these initiatives.
At the same time, the SEC addressed one of the most sensitive issues for traditional institutions: crypto custody. Rather than stepping up enforcement actions, the Trading and Markets division released concrete guidance on how broker-dealers can legally safeguard digital assets. The focus is now on effective control of assets, private-key security, and preparedness for blockchain-specific risks such as network disruptions or cyber incidents.
Bitcoin Has Yet to Reflect the Regulatory Shift
These clarifications do not introduce new requirements for the crypto sector, but they do provide a clear framework for traditional firms that had previously avoided the space due to regulatory uncertainty. The added clarity reduces internal friction and allows for long-term planning tied to institutional liquidity and tokenized financial products.
Despite this regulatory shift, Bitcoin remains well below its all-time highs, and trading volumes continue to face pressure. That disconnect follows a familiar pattern: regulatory changes affect market structure first, and prices later. What has changed is the backdrop. The rules have stopped being purely punitive and have begun to adjust to integrate crypto into the financial system
