The world of financial services is always evolving, but recently there are signs of a seismic shift. At the heart of this transformation is the rise of cryptocurrencies. Digital assets like Bitcoin, Ethereum, and a host of others – including stablecoins – have moved from the fringes of the financial system to the forefront, capturing the attention of investors, regulators, and, increasingly, traditional banks. As the cryptocurrency market continues to mature, one question that is becoming increasingly urgent to answer is whether banks in the United States should be permitted to own cryptocurrencies. If banks are to remain relevant in the rapidly changing financial landscape, then participating in the cryptocurrency markets is a necessary and logical step in the evolution of banking.

A Shifting Regulatory Landscape

Since the beginning of the crypto asset class, the relationship between banks and cryptocurrencies has been fraught with tension. Regulatory uncertainty, concerns over volatility, and the perceived risks associated with digital assets have kept banks on the sidelines. Most banks have even shied away from providing any banking services to companies and individuals who had interest in the digital asset class.

However, recent developments, particularly from the Office of the Comptroller of the Currency (OCC), have begun to pave the way for greater bank involvement in the cryptocurrency space. On March 7, 2025, the OCC issued Interpretive Letter 1183 (IL 1183), which provided much-needed clarity on the ability of national banks to engage with cryptocurrencies. The impact of this guidance is discussed in Banks In Crypto: The OCC’s Quiet Game-Changer.

Interpretive Letter 1183 affirmed early guidance that national banks can provide cryptocurrency-related services—such as custody and trading—as long as they do so in a safe and sound manner. The original guidance, articulated in Interpretive Letter 1170 in July 2020, was never withdrawn, but for almost five years it was practically disavowed.

Although the OCC has shown a path for banks to offer cryptocurrency services, the question of direct bank ownership of cryptocurrency remains a sticking point. In a joint statement from the OCC, Federal Deposit Insurance Corporation (FDIC), and Federal Reserve in January 2023, banks were cautioned against holding public cryptocurrencies like Bitcoin on their balance sheets (read: prohibited). The restriction, rooted in concerns over risk and stability, feels increasingly out of step with the realities of the modern financial system. The OCC recognized that was time to revisit this stance, and Acting Comptroller of the Currency Rodney E. Hood announced the OCC withdrew from the joint statement. Subject to safety and soundness considerations, according to the OCC, national banks have the ability to own cryptocurrencies outright.

Bringing Trust and Stability to a Volatile Market

Perhaps the strongest argument for allowing banks to provide products and services in cryptocurrency, and to own cryptocurrencies directly, is their unique ability to bring trust and stability to a market that desperately needs it. Banks have centuries of experience managing complex financial assets, from stocks and bonds to derivatives and foreign exchange. They operate under some of the strictest regulatory frameworks in the world, with requirements for capital reserves, liquidity, and consumer protection that far exceed those of the average fintech or cryptocurrency exchange.

Consider the high-profile collapses of platforms like FTX, Celsius, Voyager, and BlockFi, which left investors reeling from billions in losses. These failures underscored the risks of operating in a largely unregulated environment. By contrast, banks offer a level of security and oversight that is unmatched in the cryptocurrency space. FDIC insurance, rigorous compliance standards, and robust risk management protocols mean that customers can engage with digital assets through a bank with far greater confidence than they can through a standalone crypto exchange or lightly regulated fintech. Allowing banks to own cryptocurrencies would leverage this infrastructure to create a safer, more reliable ecosystem for digital assets.

New Revenue Streams and Competitive Relevance

Beyond stability, there is a compelling business case for allowing banks to own and provide services in cryptocurrencies. The cryptocurrency market can no longer be considered a financial niche: it is a multi-trillion-dollar asset class that continues to attract significant capital from investors across the spectrum. Banks that can custody, trade, and hold digital assets stand to capture a share of this growing market. More importantly, engaging with cryptocurrencies will allow banks to remain competitive in an era where younger generations—millennials and Gen Z—are increasingly integrating digital assets into their financial lives.

Take custody services as an example. As institutional interest in cryptocurrencies grows, so does the demand for secure storage solutions. Banks, with their established expertise in safeguarding assets, are perfectly positioned to meet this need. If permitted to own cryptocurrencies, banks could also offer innovative products—think crypto-backed loans or yield-generating accounts—that would attract tech-savvy customers and diversify revenue streams. In a financial landscape where margins are under constant pressure and fintech and crypto-native firms are encroaching on traditional banking activities, banks cannot afford to be forced to remain sitting on the sidelines.

Managing the Risks

It goes without saying that a discussion of banks and cryptocurrencies would not be complete without addressing the question of the risks. The price of Bitcoin, the largest cryptocurrency by market capitalization, has been known to swing 20% in a single day, a level of volatility that captures the attention of even seasoned risk managers. Critics have argued that by exposing banks to such fluctuations cryptocurrencies could jeopardize their stability and, by extension, the broader financial system. It is a fair concern—but one that overlooks and does not give appropriate credit to the proven ability of the banking industry to manage volatile assets.

Banks already navigate turbulent markets like foreign exchange and commodities with sophisticated tools: diversification, hedging strategies, and strict exposure limits. Applying these same principles to cryptocurrencies is both feasible and practical. Banks could further mitigate risks by focusing on well-established digital assets like Bitcoin and Ethereum, which have already been designated digital commodities. The cryptocurrencies with significant market capitalizations also offer greater liquidity and resilience than newer, untested tokens. With proper regulatory guardrails—such as capital requirements tailored to crypto holdings—the risks can be managed effectively.

The Need for Regulatory Clarity

Regulatory clarity is traditionally the strength of the financial markets in the USA, and one of the reasons that the capital markets are the largest in the world. The American banking system is the engine for growth for the greater economy, and that engine does not function well when there is uncertainty. The OCC Interpretive Letter 1183 is a giant step forward, but the OCC does not have the authority to address bank ownership of cryptocurrencies on their own. With the newly reasserted OCC guidance, the 2023 joint statement from federal regulators creates a contradictory message: banks can engage with cryptocurrencies, but they cannot fully participate. This ambiguity will continue to stifle innovation and will leave banks uncertain about how to proceed, or whether they are permitted to proceed at all.

What is needed is a clear, consistent framework that allows banks to own cryptocurrencies and provide customers with products and services all while ensuring safety and soundness. The OCC, FDIC, and Federal Reserve should work together to update their guidance, drawing on lessons from the past decade of cryptocurrency evolution. Clear rules would not only protect consumers but also give banks the confidence to invest in the infrastructure—including blockchain integration and cybersecurity—needed to support digital asset ownership.

A Modern Financial System

Finally, the benefits of bank-owned cryptocurrencies extend beyond the institutions themselves. The broader financial system stands to gain from the modernization that digital assets can bring. Blockchain technology, which underpins cryptocurrencies, offers the potential to streamline cross-border payments, reduce transaction costs, and push financial institutions to move towards true round-the-clock operations. Banks, with their vast networks and customer bases, are ideally positioned to drive these innovations forward. By owning and integrating cryptocurrencies into their operations, banks can bridge the gap between traditional finance and the emerging digital economy.

Banks also cannot afford to be left behind from the growth in the use of stablecoins. Customer expectations are growing for the modernization of the payment infrastructure. Traditional payment rails are not enough, and customers are demanding alternatives. If banks are not involved in the innovation of stablecoins then banks risk fintech companies completely usurping their role in the space.

The Path Forward

The cryptocurrency revolution is here to stay, and banks must be allowed to play a central role in shaping the future. The recent guidance from the OCC is both a positive regulatory signal and a move in the right direction, but it is only the beginning of what is required. Permitting banks to own cryptocurrencies would harness their expertise to bring trust and stability to the market, unlock new opportunities for growth, and modernize the financial system for the digital age. The active involvement of banks will help ensure that the volatility is in the asset, and not in the stability of the financial institutions providing cryptocurrency services to customers. The risks are real, but they are manageable—and the rewards far outweigh them. It is time for regulators to take the next step and let banks join the crypto revolution in full. The future of finance depends on it.