Banking Lobby Urges Delay on Crypto Bank Licences as FDIC and Regulators Evaluate Risks

U.S. banking groups are urging federal regulators to hold off on approving new licences for crypto-focused banks. They say moving ahead without clear, consistent rules could put customers and the financial system at risk.

Currently, the FDIC, OCC, and Federal Reserve are reviewing applications from crypto-linked firms, but pressure is building to put those plans on hold.

Banking Lobby Wants Equal Standards Across the Board

At the centre of this push is the Independent Community Bankers of America (ICBA), which believes that crypto banks shouldn’t be allowed to operate under looser standards than traditional banks.

In a formal letter, the group warned that different rules for different types of charters, especially those issued at the state level, could weaken accountability and customer protections. They’re urging a temporary freeze on approvals until either Congress or regulators set firm, nationwide standards.

Banking groups say the system needs to be fair, with one set of expectations for everyone. They’re not the only ones watching.

Crypto firms like Anchorage and Paxos continue to push for bank licences to operate. They believe that having clear rules and proper supervision will help make crypto safer and more reliable.

In their view, good oversight can lead to better and more secure ways for people to use digital currency.

Paxos was once given approval by the OCC to set up a national trust bank, but the approval came with conditions. Since those conditions weren’t met in time, the charter expired in 2023.

Even so, Paxos and other crypto firms still believe that with the right regulations in place, crypto banks can offer safer and more up-to-date financial services that meet the needs of today’s market.

The Independent Community Bankers of America (ICBA) issued a letter asking them to hold off on approving new crypto bank licences for the time being.

Their main concern is that without a set of consistent standards for applicants, proceeding could create confusion or lead to bigger issues.

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Global Trends Reflect the Same Caution

This isn’t just a U.S. issue. Around the world, governments are also being cautious. South Korea postponed its digital currency plans, shifting focus to stablecoins instead.

In Europe, crypto custody firms must be fully licensed, and higher-risk proposals are being turned down outright. These steps show how global regulators are prioritising structure and safety over speed.

Back in the U.S., there are signs of changing attitudes. Earlier this year, the FDIC dropped earlier guidance that had restricted crypto involvement, and the OCC followed shortly after.

Regulators now allow national banks to hold popular cryptocurrencies like Bitcoin and smart contract network Ethereum, process trades, and partner with third-party custodians. All these are now enabled for banks as long as they follow proper risk controls provided by regulators.

These changes build on a previous OCC Letter, which already made it clear that banks are allowed to safely hold and manage cryptocurrency for their customers under existing laws.

Even with all these updates, not everyone feels at ease. The FDIC has warned banks to be cautious, showing there are still worries about fraud and the safety of cryptocurrency.

Right now, regulators are trying to figure out how to support new ideas without letting things escalate. It’s a tough spot; move too fast, and things could break, but move too slow, and you risk falling behind. The outcome of their decision could shape how banking works as more of it goes digital.