TradFi Banks Open Doors to Crypto Holders as Regulatory Environment Develops

In the past year, across the world, there has been a significant shift towards a more friendly stance and acceptance of crypto–specifically Bitcoin and Ethereum, by Governments and the financial industry as a whole. This has lead to announcements by the United States and many other countries on plans to release clear regulation and laws related to the growing market. Banks in turn have stated once a clear regulatory environment exist they would be willing to custody bitcoin for their customers. Marking a complete 360 in stance, when many closed accounts and blocked transactions related to crypto.

On January 21st 2025 at the World Economic Forum (WEF) in Switzerland Brian Moynihan ( CEO of Bank of America) stated that “U.S. banking industry will embrace cryptocurrencies for payments if regulators allow it.”. The CEO of Morgan Stanley Ted Pick also echoed similar sentiment as Mr. Moynihan on the subject.

A major indication of the financial industry’s change in stance happen in February 2024 last year. When Blackrock the company owned by Larry fink a former critic of Crypto was given approval and Launched the first ETF tied to bitcoin under the ticker IBIT (IShares Bitcoin trust). Within less than one year this ETF has taken in over 50 billion dollars making it one of the most successful ETF launches in history.

Historically Governments and the Financial world has held a negative outlook on bitcoin and the crypto industry as a whole as whole. Linking it to money laundering, the dark web and other illicit transactions. The enforcement of regulation like Know Your Customer (KYC) policies by crypto exchanges which makes customers prove their identify before they are allowed to make purchases have assisted in changing this view of this growing asset class as a more legitimate one.

A majority of banks still refrain from doing any business related to crypto however a crowing number are stating their interest in opening crypto related services, mainly the storing of bitcoin and Ethereum. Burling Bank, Custodia Bank, Kraken Bank, Standard Chartered, and Commerzbank already offer the ability for their customers to custody Bitcoin.

In as early as 2023 the FDIC reported that 136 banks expressed interest or were already involved in crypto related assets. The incoming Trump Administration has been another major indicator of this evolving change towards the handling of crypto assets. furthered the development of a more defined regulatory environment and has appoint David Sacks as “Crypto Czar” to lead efforts pushing for regulation to provide a clearer regulatory environment. On January 23, 2025 Trump signed an executive order named “Strengthening American Leadership in Digital Financial Technology,” which aims to fostering a more crypto friendly environment in the United states.

Under the new Trump administration, the SEC has also rescinded SAB 121 in favor of SAB 122 which will allow for financial Institutions to asses the risk of crypto currency assets utilizing their own metrics, in line with FASB and IAS guidance. This is another change which provides a path for a clearer regulatory environment for banks interested in getting involved in crypto assets.

Despite these positive advancements in the regulatory realm, investors foraying into the crypto industry should remain vigilant when deciding on investing in the assets. Daily reports of fraud and theft continue to plague the industry. With the amount of reports of hacking, fraud and theft Security and due diligence must continue to be paramount should continue to be key during decision making. As we are yet to see if allowing banks the ability to custody assets vs self custody provides clear benefits to investors.

One thing is clear, the financial industry and digital assets appear to be growing more intertwined as the industry develops and more Banks are stating their interest at getting in the game.