18 March 2025
by Payments Intelligence
What is this article about?
The Federal Reserve’s shift on crypto banking access could impact payments, stablecoins, and digital assets.
Why is it important?
The Fed’s move may reshape how crypto firms access banking services, with wide implications for payments and financial innovation.
What’s next?
Banks and regulators will determine how this policy is applied, shaping future access to payments infrastructure for crypto firms.
During the Biden Administration, the US Federal Reserve (the Fed) explored plans for Project Cedar, an early-stage framework for a potential central bank digital currency (CBDC). However, recent political developments have brought these plans into question. Senator Mike Lee has introduced the No CBDC Act, aimed at preventing the Federal Reserve from issuing a CBDC, and former President Donald Trump has stated his opposition to the concept, signing an executive order that would bar federal agencies from developing a CBDC. These moves reflect growing political resistance to a US-issued digital currency, raising broader questions about the role of public and private digital assets in the future financial system.
Senator Lee has been among the most vocal opponents of a US CBDC, expressing concerns about potential government overreach. In public statements, he argued that “the United States doesn’t need to create a [CBDC] to know it is a bad idea,” and described CBDCs as “nothing more than a tool for tyrants to intimidate, control, and surveil the activities of American citizens.” These views highlight the political divisions shaping the debate over the future of digital currency in the United States.
Crypto and digital asset firms have long faced difficulties in securing stable banking relationships, largely due to ongoing regulatory uncertainty. Many banks have been hesitant to engage with these businesses, citing concerns over compliance burdens, anti-money laundering (AML) obligations, and the inherent volatility of digital assets. Limited access to banking services has, in turn, constrained these firms’ ability to operate efficiently within the broader financial system, including in areas such as payments, settlements, and liquidity management.
As a result of limited banking access, many crypto companies have relied on offshore banks and fintech intermediaries, which has restricted their ability to operate effectively within the traditional financial system. Some observers suggest that the Federal Reserve’s shift in stance may represent a significant development, potentially enabling greater banking integration and financial stability for crypto firms. If realised, such changes could also have wider implications for the global payments ecosystem, particularly in areas where crypto and traditional finance intersect.
The Federal Reserve has recently signalled a more accommodating stance toward traditional banks that serve crypto-related businesses. Federal Reserve Chair Jerome Powell noted that banks are “perfectly able” to engage with crypto clients, provided they can effectively manage the associated risks. This position could allow for greater integration of crypto businesses into the regulated financial system, potentially offering more stability and clearer risk management—factors that may also influence related areas such as payments and settlement.
One notable change is the removal of “reputational risk” as a consideration when evaluating applications for master accounts. Federal Reserve Chair Powell confirmed that regional reserve banks will no longer take reputational factors into account when deciding whether to grant access. Previously, such subjective assessments had prevented some lawful crypto businesses from securing essential banking services, limiting their ability to operate within the regulated financial system. Access to master accounts is seen as critical for firms engaged in activities such as payments processing and stablecoin issuance, where reliable banking relationships are fundamental to managing transactions and liquidity.
The Federal Reserve is also reviewing earlier guidelines that discouraged banks from working with crypto-related businesses. This includes a possible revision of supervisory letters and interagency statements that had previously classified activities such as issuing or holding crypto assets as inconsistent with safe banking practices. Revisiting these policies could influence how banks approach crypto firms, including those involved in payments-related services such as stablecoin issuance, custody, and settlement.
Another aspect of this policy shift is the Federal Reserve’s effort to clarify regulatory expectations for banks engaging with crypto businesses. In response to industry feedback, the Fed is working on providing clearer guidance on permissible banking activities involving cryptocurrencies. Greater clarity may help address ambiguities that have contributed to inconsistent banking practices and limited access to financial services—issues that are particularly relevant for crypto firms offering payment and settlement services.
Crypto businesses have historically struggled to secure banking services due to a combination of regulatory uncertainty, compliance challenges, and financial risks. Traditional financial institutions have been reluctant to engage with crypto firms, citing unclear regulatory guidelines, concerns over illicit activity, and the volatility of digital assets. Reputational risk has also been a significant factor, with banks wary of potential association with financial crime or unregulated crypto activities. These challenges have limited access to essential banking services for firms engaged in crypto payments, stablecoin issuance, and other financial services linked to digital assets.
Regulatory guidance has reinforced banks’ hesitations, with agencies such as the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC) requiring extensive due diligence when working with crypto clients. These guidelines emphasise strong AML and know your customer (KYC) controls, which many banks view as complex and high-risk when applied to crypto firms. This has created further barriers to banking access, particularly for businesses involved in crypto payments, stablecoin issuance, and related services that rely on traditional banking infrastructure to operate effectively.
A lack of consistent regulatory classification for cryptocurrencies continues to create uncertainty. Unlike traditional assets, crypto is not uniformly defined as a commodity, security, or currency, resulting in regulatory inconsistencies. The Securities and Exchange Commission (SEC) has pursued enforcement actions for alleged securities violations, while the Commodity Futures Trading Commission (CFTC) classifies certain cryptocurrencies, including Bitcoin, as commodities. This fragmented approach is further complicated by warnings from the Federal Reserve and the Office of the Comptroller of the Currency (OCC), which have cautioned banks about liquidity and fraud risks associated with crypto. Without clear definitions, banks face ongoing compliance challenges, making them reluctant to provide services to crypto firms—including those focused on payments and stablecoin issuance.
The collapse of several crypto-friendly banks has further heightened concerns about the risks of engaging with the sector. Silvergate Bank failed in early 2023 following a bank run linked to the FTX exchange collapse, while Signature Bank and Silicon Valley Bank (SVB) also failed shortly afterward, both with notable exposure to crypto-related businesses.
These high-profile failures contributed to broader risk aversion among banks and regulators. Some industry commentators have suggested that regulatory pressure may have influenced banks’ decisions to distance themselves from crypto clients—described by some as “Operation Choke Point 2.0,” an alleged effort to limit the industry’s access to banking. These developments have added to the challenges faced by crypto firms—particularly those offering payment and stablecoin services—in securing stable financial infrastructure.
More recent trends in crypto-related banking activity reflect a mix of caution and gradual re-engagement. In 2024, global investment in crypto and blockchain began to recover, reaching $3.2 billion in the first half of the year, although large-scale deals remained limited. While this signals renewed interest in the sector, the gap between returning investor confidence and ongoing banking hesitation continues to pose challenges—particularly for firms involved in payments, stablecoins, and settlement services that require reliable access to banking infrastructure to scale.
The Federal Reserve’s recent decision to remove “reputational risk” as a criterion for banks serving cryptocurrency businesses has prompted a range of responses from banks, regulators, and crypto firms. These differing reactions reflect ongoing debates about the role of crypto within the broader financial system and may influence how easily firms—particularly those involved in payments, stablecoins, and related services—are able to access banking in practice.
Major U.S. banks, including JPMorgan, Goldman Sachs, and Citigroup, are reportedly preparing to expand their cryptocurrency-related offerings in response to the Federal Reserve’s recent policy shift, according to a report from Barrons. At the same time, the Federal Deposit Insurance Corporation (FDIC) is reviewing updates to its guidelines that would allow banks to offer certain crypto-related services without prior regulatory approval. These developments mark a significant shift from earlier restrictions and could enable banks to provide services such as crypto custody and tokenised deposits—both of which have potential implications for payment settlements, digital asset-backed transactions, and stablecoin-related banking services.
Crypto firms have broadly welcomed these regulatory adjustments, viewing them as steps toward greater integration with the traditional financial system. Some in the industry suggest that these changes could facilitate smoother fiat-to-crypto transactions and improve liquidity—both critical for supporting payment flows, remittances, and stablecoin operations. However, not all firms are fully confident in the shift, with some industry leaders remaining cautious about how consistently these changes will be implemented by banks.
The Federal Reserve’s decision to ease banking restrictions on crypto firms is seen by some as a development that could reshape parts of the digital assets and payments industries. Stakeholders suggest that the shift may improve access to banking services, strengthen payment infrastructure, and increase liquidity in crypto markets. However, uncertainty remains over whether banks will fully engage with crypto clients or continue to limit access due to ongoing regulatory and compliance concerns.
A long-standing challenge for crypto firms has been limited access to traditional banking services, often forcing them to rely on offshore institutions or alternative financial networks. Some market participants believe that the Fed’s policy change may help crypto exchanges, stablecoin issuers, and Web3 firms gain more stable banking access, which could support operational resilience and financial management. Direct access to banking services may also make it easier for these firms to manage fiat transactions, reduce dependence on less stable partners, and scale their activities more effectively.
Stablecoin issuers, in particular, may benefit from improved banking access, as stronger relationships with traditional banks could support better reserve management and greater transparency in liquidity operations. Some observers suggest that this may help strengthen confidence in the stablecoin market and facilitate broader use in payments, remittances, and cross-border transactions.
The extent to which crypto firms will benefit is likely to depend on how individual banks interpret and apply the updated guidelines. While some financial institutions may choose to engage more actively with crypto clients, others may remain cautious due to persistent concerns around compliance, AML obligations, and financial crime risks.
One of the key implications of the Federal Reserve’s decision may be improved crypto-fiat on/off ramps—the mechanisms that allow businesses and consumers to move funds between the crypto ecosystem and the traditional financial system. These payment rails have historically been unreliable, as many crypto firms have faced challenges maintaining stable banking relationships, leading to fragmented and inefficient payment processing.
Some stakeholders suggest that greater banking access could enable crypto firms to offer faster and more reliable payment settlements, helping merchants accept cryptocurrency payments and convert them into fiat currency more efficiently. Improved banking integration may also support cross-border transactions, particularly in markets where traditional banking infrastructure is limited, potentially lowering costs and improving access to remittances.
Banks may also consider developing new financial products tailored to crypto firms, including real-time settlement solutions, digital asset custody, and stablecoin-backed accounts. If realised, these developments could enhance connections between the crypto sector and traditional financial services, with implications for payment providers, remittance firms, and cross-border commerce.
While recent regulatory adjustments may improve access for some crypto firms, significant challenges will likely remain. Regulatory uncertainty and compliance requirements—particularly around AML and KYC obligations—continue to present barriers for banks considering relationships with crypto clients. Although the Federal Reserve has signalled a more neutral stance, many financial institutions still view crypto as a high-risk sector requiring enhanced due diligence.
There are also concerns that banking access may not be applied uniformly across the sector. Some banks may engage only with large, well-established crypto firms—such as publicly listed exchanges or stablecoin issuers with stringent compliance frameworks—while avoiding smaller or less mature projects. This selective approach could limit broader access to banking services and create uneven opportunities, including for firms involved in crypto payments and stablecoin-backed transactions.
Finally, banks must weigh the operational and reputational risks associated with servicing crypto firms, especially in light of previous industry failures. Some institutions remain cautious about potential regulatory backlash, particularly if future policy shifts reintroduce restrictions or tighter oversight of crypto-related banking activities.
The Federal Reserve’s shift on crypto banking access comes amid diverse regulatory approaches to digital assets worldwide. While some jurisdictions have taken steps to integrate crypto businesses into traditional financial systems, others have maintained strict oversight or limitations. Understanding these trends may offer insight into whether the Fed’s position reflects a broader shift in financial regulation.
Some observers suggest that the Federal Reserve’s decision may prompt other central banks to reconsider their stance on crypto banking access, particularly in jurisdictions where financial institutions have been hesitant to engage with the sector. If U.S. banks begin to integrate crypto services more openly, regulators in other countries could feel pressure to provide clearer guidance on how banks may work with crypto firms, rather than leaving such decisions to individual institutions.
However, regulatory approaches remain fragmented. While central banks such as the European Central Bank (ECB) have voiced scepticism about the long-term role of cryptocurrencies, others—such as the Central Bank of the UAE—are actively collaborating with digital asset firms. As a result, the Federal Reserve’s shift may not signal a global trend but could act as a reference point for countries still evaluating their position on crypto banking relationships, including those related to payments, stablecoins, and digital asset settlement.
How the banking industry responds to the Federal Reserve’s updated position will be key to determining its practical impact on crypto businesses. Some financial institutions may view this as an opportunity to expand into digital assets and related services, including stablecoin-backed products and crypto payment settlements. Others may remain cautious, given ongoing regulatory uncertainties and the complexity of compliance with AML and risk management requirements. The extent to which banks choose to engage with crypto firms will likely shape how widely crypto-based payment and settlement solutions develop in the mainstream financial system.
Several large U.S. banks, including JPMorgan, Goldman Sachs, and Citigroup, are already active in crypto-related services such as custody solutions and asset tokenisation. Some market participants suggest that the Federal Reserve’s policy shift could encourage these institutions to expand into offering banking services for crypto exchanges, stablecoin issuers, and payment processors.
However, larger banks may remain cautious due to the potential for regulatory scrutiny and compliance risks. Many are expected to prioritise relationships with established, highly regulated crypto firms—such as publicly listed exchanges and stablecoin issuers with robust compliance frameworks—over smaller or higher-risk ventures.
Smaller, regional, and fintech-focused banks have historically been more open to serving crypto clients. Before their collapses, banks such as Silvergate and Signature Bank were key providers of banking services to the crypto sector. Some observers note that the Federal Reserve’s updated stance could create opportunities for new or existing niche banks to step into this space, potentially offering dedicated services to crypto firms involved in payments, stablecoins, and settlement.
While the Fed has relaxed some restrictions, banks remain subject to stringent compliance requirements, including AML and fraud prevention obligations. Given the pseudonymous and cross-border nature of many crypto transactions, concerns about illicit finance remain a barrier to broader banking engagement. Banks that choose to serve crypto clients will likely require enhanced due diligence and ongoing risk monitoring.
At the same time, if regulatory clarity improves and market demand grows, banks may explore new financial products tailored to crypto businesses. These could include crypto-backed loans, stablecoin-linked deposit accounts, and blockchain-based settlement solutions—potentially supporting payment flows and stablecoin integration within traditional banking infrastructure. However, the development of such products will depend on evolving market conditions and regulatory certainty.
The Federal Reserve’s policy shift has been seen by some as a positive signal for improving banking access for crypto businesses. Yet, whether this will translate into broader, practical changes remains to be seen. Banks will need to navigate complex compliance requirements, including AML and financial crime risks, while weighing regulatory uncertainties that could affect long-term engagement with the sector.
If successfully implemented, this shift could provide a reference point for integrating crypto into traditional financial services globally. On the other hand, if banking hesitation persists, crypto businesses may continue to face difficulties securing stable, long-term banking relationships—leaving key parts of the industry in a state of regulatory and operational uncertainty.
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