Crypto Policy Shifts: Banks' New Role and Federal Changes

By: Eva Baxter

The evolving landscape of cryptocurrency regulation is witnessing significant shifts with Washington setting the stage for a potential influx of bank-issued crypto dollars. Key changes are unfolding around Bitcoin, stablecoins, and how banks can engage with digital assets, setting the tone for transformative quarters ahead.

As financial institutions adjust their strategies, major players like Vanguard have opened the floodgates to tens of millions of clients wishing to access crypto ETFs, a move that could provide a substantial boost to this sector. Vanguard’s reversal, after staunchly opposing crypto exposure, along with Bank of America's decision to allow advisors to recommend crypto allocations of 1% to 4% starting in January, marks a major turn in the financial industry's approach to digital currencies, potentially ushering increased liquidity and wider adoption.

Regulatory Adjustments and Market Dynamics

Meanwhile, the Federal Deposit Insurance Corporation (FDIC) has initiated rulemaking under the GENIUS Act to establish guidelines for banks wishing to issue their own stablecoins. This development underscores a structural shift towards making public chains centers for dollar-based transactions. However, the timeline suggests these changes might influence Bitcoin liquidity only in late 2026.

Further accelerating this transformation, the US Federal Reserve has retracted its 2023 guidance that had restricted how banks could engage with crypto, aligning with broader shifts towards regulatory adaptability and innovation. This action, perceived as a pullback from stringent restrictions, hints at a more crypto-friendly posture likely to foster growth and innovation within the digital currency ecosystem. As regulators signal a more accommodative stance, banks are likely to explore new opportunities in crypto services without the previous regulatory constraints.

Prospects and Challenges Ahead

The first quarter of the coming year may see a convergence of wealth-channel expansion and seasonal market tendencies, traditionally favorable for Bitcoin, potentially igniting a significant rise. While historical data indicates strong performance in early-year quarters, the unprecedented downtrend earlier this year underscores the uncertainty and volatility inherent in these markets.

The landscape of institutional crypto engagement is poised for evolution, with distribution paths widening and seasonal factors aligning. However, as regulatory mechanisms like the GENIUS Act are instituted to bring on-chain dollar liquidity, the broader impacts will materialize over a longer horizon. This phase of transition invites keen observation as industry roles adjust, signaling profound implications for both retail and institutional investors as blockchain technology continues to redefine financial systems.