Key Takeaways
- Leading US banks are monitoring the space for signs of change in crypto regulation before they can join in.
- The banks had previously slowed down on crypto due to an unfriendly and punitive regulatory landscape.
- There are positive signals from regulators, but the banks are waiting to see which one among them will be the first to act.
Big American Banks are tiptoeing towards cryptocurrencies as they watch the scenario for signals about crypto regulation.
According to a report on Reuters, several American-based big banks were monitoring the regulatory space to secure more substantial endorsements before taking the initial steps, which could be tentative, focusing mainly on pilot programs, limited crypto trading, and partnerships.
Simmering Changes Within the Sector
The media report cited at least four industry executives who observed that Wall Street giants had largely been slow to adopt crypto-based activities due to an unfriendly and punitive crypto regulatory regime that wouldn’t support growth. Nonetheless, with the simmering changes within the sector, the major lenders are carefully watching the space, with many being hesitant to be the first among their rivals to break into the crypto space before clear crypto regulations are established.
According to one of the executives who spoke to Reuters anonymously, the Big American banks were watching each other’s moves to see who would go first, adding that the rest would likely follow suit on small-scale pilot projects as they weighed other business initiatives. Commenting on the subject, Jamie Dimon, long-time crypto skeptic and CEO of JP Morgan Chase, one of the largest US banks, stated explicitly that they wouldn’t get into crypto custody or expand significantly even if regulations ease. Dimon said:
“When I look at the bitcoin universe, the leverage in the system, the misuse in the system, the money laundering issues, trafficking, I’m not a fan of it […] we’re going to allow you to buy it, we’re not going to custody it. … I don’t think you should smoke, but I defend your right to smoke. I defend your right to buy Bitcoin.”
Awaiting Straightforward Guidelines
The move by the big American banks happens at a time when US President Donald Trump is working hard to fulfill his campaign pledge to transform America into the world’s crypto capital. Since taking office in January, Trump has wooed cryptocurrency industry experts at the White House, further pledging to promote cryptocurrency adoption and create a strategic Bitcoin reserve.
The Reuters report further noted that at least six banking industry experts have indicated that, while there are signs of pending crypto regulations everywhere, Big American banks are awaiting more straightforward guidelines from the Trump administration regarding what they can do legally within the cryptocurrency space. Dario de Martino, A&O Shearman M&A partner who works on crypto-related issues, stated:
“The shift in the stance is encouraging for traditional lenders, but they are still approaching it with caution and viewing the changes in regulation as an opportunity to engage and not a free pass.”
Custody businesses to store and manage crypto assets are promising, bankers and executives said, but they have thin margins and potentially pose high risks. Charles Schwab CEO Rick Wurster told Reuters earlier this month that the traffic lights from financial regulators were flashing “pretty green” for large firms to grow in crypto. The signals have reinforced Schwab’s plans to offer spot crypto trading within a year, he said.
Conclusion
There is growing evidence that emerging signs of crypto regulation have caught the attention of big American banks, who are awaiting friendlier policies before they can make their next moves. The US Office of the Comptroller of the Currency cleared the path to allow lenders to engage in certain crypto activities, including custody, stablecoin activities, and participation in distributed ledger networks. At the same time, the US Securities and Exchange Commission also scrapped earlier accounting guidance that made it expensive for banks to deal in crypto.
Frequently Asked Questions
How is crypto regulated in the US?
At the federal level, the regulation of cryptocurrency-related activities in the United States is grounded in the application of existing financial laws to digital assets, resulting in inconsistencies due to the unique nature of these assets.
Does the SEC regulate crypto in the USA?
The Commodity Exchange Act (CEA) plays a crucial role in regulating cryptocurrency markets, with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) exercising jurisdiction over different aspects of the crypto market.
Who regulates stablecoins in the US?
Currently, stablecoin issuers are typically registered as money service businesses (MSBs) with the Treasury’s FinCEN and/or possess specific state licenses. However, legislators are on the way to passing the GENIUS Act, which deals with stablecoin regulation.
