What Banks Deal With Cryptocurrency?

Traditional banking institutions and the evolving cryptocurrency space have an increasingly intertwined relationship. While these two financial realms were once largely separate, a growing number of banks are now exploring or offering various forms of crypto-related services. This shift reflects increasing mainstream adoption of digital currencies and public interest in integrating these assets with established financial providers. Understanding how banks interact with cryptocurrency is becoming important for individuals navigating the modern financial landscape.

How Traditional Banks Engage with Cryptocurrency

Traditional banks are engaging with the cryptocurrency ecosystem in several ways, moving beyond their historical separation from digital assets. This engagement often involves different models, ranging from direct customer offerings to behind-the-scenes support for the broader digital asset market. Banks are adapting to the rise of digital currencies, recognizing the need to evolve their services.

Some banks are beginning to offer direct-to-consumer services, allowing individuals to buy, sell, and hold cryptocurrencies directly within their existing banking platforms. While not yet widespread, this model aims to integrate digital asset management seamlessly into traditional banking applications.

Other banks facilitate indirect retail services, acting as fiat on/off-ramps for major cryptocurrency exchanges or stablecoin transactions. This means they process deposits from and withdrawals to crypto platforms, enabling customers to fund their crypto accounts or cash out their digital assets. These banks do not directly hold the cryptocurrencies themselves but provide the necessary financial infrastructure for transactions.

Beyond retail, banks are increasingly providing institutional services, such as custody, prime brokerage, and other financial solutions for large-scale clients like hedge funds and asset managers dealing with digital assets. This involves securely storing digital assets on behalf of institutions and offering specialized trading and settlement services. The Office of the Comptroller of the Currency (OCC) has issued guidance affirming the authority of national banks to provide crypto asset custody services.

Many banks are also exploring and utilizing blockchain technology for internal operations, payment systems, or tokenized assets, even if they are not directly dealing with public cryptocurrencies. This involves leveraging distributed ledger technology to enhance efficiency, reduce costs, and improve security in areas like interbank settlements and trade finance. JPMorgan Chase, for instance, has developed its Onyx platform and JPM Coin for internal settlement and institutional payments.

Some banks are involved in the issuance or support of fiat-backed stablecoins. These digital assets are designed to maintain a stable value by being pegged to a traditional currency, such as the U.S. dollar. By supporting stablecoins, banks contribute to the liquidity and stability of the broader digital asset market, providing a bridge between traditional finance and the crypto world. Goldman Sachs has shown interest in stablecoins like USDC.

Banks Providing Direct Retail Cryptocurrency Services

A growing number of traditional banks are now offering specific services that allow individual retail customers to engage with cryptocurrency. These offerings vary in their directness, ranging from integrated buying and selling within banking apps to facilitating seamless connections with third-party crypto exchanges. This shift reflects a recognition of increasing consumer demand for accessible digital asset management.

Ally Bank, a prominent online financial institution, stands out by enabling its customers to connect their bank accounts with external cryptocurrency exchanges like Coinbase. While Ally Bank does not offer direct crypto trading tools within its own platform, this connectivity allows users to trade digital assets on these secure external platforms. Through this integration, customers can manage their fiat funds and crypto investments in a more streamlined manner. Ally Bank also supports investments in crypto-related products such as Bitcoin futures and access to crypto-based exchange-traded funds (ETFs).

Quontic, a community bank, has embraced cryptocurrency by offering unique features like interest-bearing accounts for digital assets and a Bitcoin rewards checking account. This allows customers to potentially earn passive income on their cryptocurrency holdings or receive Bitcoin as rewards for everyday spending. These offerings aim to combine traditional banking convenience with the benefits of digital assets.

JPMorgan Chase, a major financial institution, has also progressed in its retail crypto offerings, though primarily through facilitation rather than direct trading. Chase customers can link their bank accounts to Coinbase wallets, enabling them to fund their crypto accounts more easily. This partnership allows for a more secure and integrated experience for individuals looking to access the crypto market through their existing banking relationships.

U.S. Bank enables individual clients to make transactions with major cryptocurrency exchanges using their bank cards. This provides a straightforward method for customers to purchase cryptocurrencies through platforms they already use.

SoFi, an online personal finance company with banking services, has introduced a service allowing its members to send money internationally using the Bitcoin Lightning Network. This innovative approach converts U.S. dollars into Bitcoin in real-time for transfer, then converts it back into the local currency for the recipient. This service aims to provide a faster and more cost-effective option for international remittances.

Banks Supporting the Broader Cryptocurrency Ecosystem

Beyond direct retail offerings, many traditional banks play a significant role in the broader cryptocurrency ecosystem by providing essential services to crypto businesses and developing underlying blockchain technologies. These institutions often act as the financial backbone for the digital asset industry, even if they do not directly offer crypto services to individual consumers.

JPMorgan Chase uses its Onyx platform and JPM Coin. Onyx is a blockchain-based platform designed for wholesale payment transactions, enabling faster and more secure information exchange among financial institutions. JPM Coin, a digital token, facilitates instant cross-border payments for institutional clients, showcasing the bank’s commitment to digital asset infrastructure. JPMorgan also provides institutional-grade research on crypto markets and supports clients incorporating Bitcoin ETFs into wealth portfolios.

Goldman Sachs engages in Bitcoin futures and options trading. The bank actively explores other crypto-related products and has been involved with stablecoins like USDC, which are pegged to the U.S. dollar. Goldman Sachs leverages blockchain technology to enhance security and streamline the movement of money and information globally.

Evolve Bank & Trust serves as a banking partner for numerous cryptocurrency firms, offering API banking services and digital asset custody solutions. Their developer-friendly approach allows startups and established crypto platforms to integrate seamlessly with traditional banking services. This support helps crypto businesses manage their fiat reserves and process transactions efficiently.

Customers Bank provides banking services to some of the largest names in the cryptocurrency industry, including major exchanges and stablecoin issuers. The bank has also partnered with crypto platforms to offer real-time payment solutions, such as Customer Bank’s Instant Token (CBIT). This enables rapid settlement of U.S. dollar payments for high-volume traders and businesses.

Bank of America actively engages in research and development related to cryptocurrencies. The bank holds numerous blockchain-related patents, indicating a long-term interest in the technology’s potential applications across its extensive product offerings. Bank of America permits its customers to interact with crypto platforms using credit or debit cards and offers wealth management clients access to spot Bitcoin ETFs.

Anchorage Digital is a U.S. federally chartered crypto bank. It provides institutional custody, staking, trading, and fiat custody services for digital assets. As a regulated entity, Anchorage Digital sets a standard for secure and compliant digital asset operations under federal oversight, offering a comprehensive solution for institutional clients. Other major banks like BNY Mellon, State Street, and Citibank also offer crypto custody services for institutions, further solidifying the bridge between traditional finance and digital assets.

Considerations for Using Bank Cryptocurrency Services

Individuals considering using cryptocurrency services offered by traditional banks should be aware of several important factors. These considerations help ensure a clear understanding of the benefits, limitations, and responsibilities associated with integrating digital assets into traditional banking. Understanding these aspects is important for informed financial decisions.

One significant consideration is the regulatory status and protection of cryptocurrency assets within a banking framework. While the bank itself is typically regulated and traditional fiat deposits are often covered by Federal Deposit Insurance Corporation (FDIC) insurance, this protection generally applies to U.S. dollar deposits and not directly to cryptocurrency assets. Cryptocurrencies held or facilitated through a bank may not carry the same insurance or regulatory safeguards as traditional cash balances. Recent regulatory guidance from the OCC has clarified the authority of national banks to provide custody services for crypto assets. It is important to understand what specific protections apply to the digital assets themselves.

The custody model employed by the bank is another important aspect to examine. Some banks may directly hold the cryptocurrency on behalf of their clients, while others might partner with third-party custodians specializing in digital asset security. Understanding whether the bank or a third party holds the crypto, and what security measures are in place, is important for assessing the safety of one’s digital assets. Reputable custodians often employ advanced security features like cold storage and multi-factor authentication.

Account requirements and eligibility for these services typically involve standard know-your-customer (KYC) and anti-money laundering (AML) procedures, similar to opening any traditional bank account. Banks must verify customer identities to comply with financial regulations and prevent illicit activities. Additional prerequisites might include maintaining a minimum balance in linked accounts or having specific account types to access crypto services.

Customers should also inquire about transaction limits and fees associated with buying, selling, or transferring cryptocurrency through bank platforms. These can vary significantly between institutions and services. Fees might include transaction charges, spread markups, or monthly service fees, and there may be daily, weekly, or monthly limits on the amount of cryptocurrency that can be transacted. Understanding these costs and limitations beforehand is important for managing one’s digital asset activities.

Individuals must remember that using bank cryptocurrency services does not alter their tax obligations related to crypto transactions. The Internal Revenue Service (IRS) generally treats cryptocurrency as property for tax purposes, meaning capital gains or losses may arise from selling, trading, or using cryptocurrency for payments. Banks typically provide transaction statements, but users remain responsible for accurately reporting all cryptocurrency-related income and gains on their tax returns.