Which Banks Support Cryptocurrency and How?
Discover how traditional banks and specialized financial services engage with cryptocurrency, exploring their varying approaches and regulatory challenges.
As digital assets gain wider recognition, individuals and businesses seek to understand how traditional banking institutions interact with this evolving technology. The relationship between banks and cryptocurrency is not uniform, encompassing a range of engagement levels from cautious integration to specialized digital asset services. This article clarifies the various ways banks currently support, or do not support, the cryptocurrency ecosystem.
Understanding Bank Engagement with Cryptocurrency
The concept of “bank support” for cryptocurrency encompasses a broad spectrum of activities, not a single, unified approach. At one end, support means a bank allows customers to transfer funds to and from regulated cryptocurrency exchanges without undue restrictions, primarily facilitating fiat transactions for crypto activities. Further along, some financial institutions offer more direct interactions, such as indirect investment in crypto products or specialized services for institutional clients, including custody solutions. These varying levels reflect different business strategies, risk appetites, and interpretations of the evolving regulatory environment.
Traditional Banks and Digital Assets
Most traditional banks remain cautious about direct engagement with cryptocurrencies. While they permit customers to deposit and withdraw fiat currency to and from regulated cryptocurrency exchanges, these transactions often occur under heightened scrutiny. Banks like JPMorgan Chase and Ally Bank facilitate transfers to major exchanges but do not typically offer direct cryptocurrency buying, selling, or custodial services for retail customers.
Traditional banks often impose limitations due to perceived risks, including potential for fraud, illicit activities, and market volatility. For example, some banks previously restricted credit card use for crypto purchases, or blocked transactions. U.S. Bank, however, offers cryptocurrency custody services specifically for institutional investment managers, indicating a targeted approach.
JPMorgan Chase has also developed its blockchain platform, Onyx, and issued JPM Coin for internal institutional payments, demonstrating interest in the underlying technology rather than direct retail crypto services. This illustrates how traditional banks might engage with blockchain for efficiency and new financial products without directly offering consumer-facing crypto trading. Their general stance remains one of caution, focusing on risk management and compliance while gradually exploring institutional-grade digital asset solutions.
Dedicated Crypto-Native Financial Services
A distinct category of financial institutions has emerged focused on digital assets. These crypto-native services bridge traditional banking functions with comprehensive cryptocurrency offerings. Unlike conventional banks, these entities often provide direct cryptocurrency trading, custodial services, and innovative financial products tailored to the digital asset market.
For example, Anchorage Digital Bank, the first federally chartered crypto bank in the U.S., offers institutional clients integrated financial services like custody, trading, and staking. Other fintech companies, such as Mercury, cater to startups and Web3 companies, facilitating seamless bank transfers to major crypto exchanges and offering advanced financial management tools. Revolut and Wirex are examples of platforms providing in-app cryptocurrency trading, multi-currency support, and crypto-linked debit cards, allowing users to spend digital assets like traditional money.
These specialized institutions also offer crypto-backed loans, where users leverage digital assets as collateral for fiat currency loans. Companies like Figure and Arch Lending provide these loans, with Figure offering fixed interest rates around 8.91% (9.999% APR) for loans collateralized by Bitcoin or Ethereum. These loans allow individuals and businesses to access liquidity without selling their cryptocurrency holdings, potentially avoiding a taxable event. These crypto-native services represent a proactive approach to integrating digital assets into the broader financial system.
Regulatory Landscape and Banking Decisions
The regulatory environment significantly influences how banks engage with digital assets, shaping their willingness and ability to offer crypto-related services. Historically, a lack of clear guidance and concerns over illicit activities made traditional banks hesitant to fully embrace cryptocurrencies. Federal banking agencies, including the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve, have recently provided clearer frameworks.
Recent shifts in regulatory policy ease previous restrictions, allowing banks more freedom to engage with digital assets and crypto businesses, provided they maintain proper risk management. This includes withdrawing prior cautionary statements and clarifying that crypto-asset custody and stablecoin activities are permissible. The repeal of Staff Accounting Bulletin (SAB) 121, which required banks to treat customer-held crypto assets as liabilities, has also made it easier for banks to offer custodial services.
Despite these changes, stringent anti-money laundering (AML) and Know Your Customer (KYC) requirements remain paramount. The Financial Crimes Enforcement Network (FinCEN) classifies entities dealing with cryptocurrencies as Money Services Businesses (MSBs), requiring them to register and implement robust AML/CFT programs. This includes conducting customer identification procedures, filing Suspicious Activity Reports (SARs) for suspicious transactions, and complying with the Travel Rule, which mandates sharing originator and beneficiary information for transactions of $3,000 or more.