FDIC Leads U.S. Regulators in Crypto Custody Warning to Banks

Jimmy Aki
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On July 15, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) warned U.S banks about the spate of risks associated with crypto asset custody.

The agencies cited concerns about legal rights, cybersecurity, and asset segregation, as they urged banks to strengthen oversight before offering custody services.

FDIC, Fed, and OCC Sound Alarm on Crypto Custody Risks

The agencies jointly warned that crypto custody carries significant liability due to unclear ownership rights, especially in cases of insolvency. This is despite looking appealing to some banks.

They also flagged the risks of lack of transparency that is characterized by third-party custodial arrangements.

This is the clearest signal yet that U.S. regulators want ironclad safeguards before banks start offering crypto custody services.

As part of the advisory, banks must notify their primary regulator before engaging in digital asset custody activities.

Institutions are also expected to implement real-time auditing systems, conduct enhanced due diligence on custodial partners, and maintain segregation of customer and proprietary crypto assets.

The FDIC’s stance echoes its broader concern over how digital assets could erode depositor confidence or impair lending power if not properly regulated. The guidance follows up on the agencies’ earlier 2023 crypto roadmap and marks a coordinated effort to limit potential systemic spillovers.

Similarly, the Bank of England (BoE) warned against bank-backed stablecoin, as UK regulators favor tokenized deposits over retail stablecoins to preserve monetary control. The regulators aim to reduce oversight that could result in asset management and compliance failures by drawing attention to the custodial layer of crypto infrastructure.

Custody Under Scrutiny as Tokenized Finance Gains Momentum

The U.S. regulators’ coordinated advisory arrives at a time when tokenized finance is accelerating, reshaping how digital assets are stored and transferred across institutional rails.

With JPMorgan’s JPM Coin, BNY Mellon’s crypto custody services, and Citi’s tokenization platform in motion, banks are now building infrastructure that integrates blockchain with traditional systems.

However, regulators argue that not all banks possess the operational nous to safeguard crypto assets effectively. The risk, they believe, is not crypto in itsself, but more of custodial incompetence.

https://twitter.com/BillAckman/status/1599402199783653376

This renewed focus on custody also comes as financial institutions explore tokenized deposits, stablecoins, and real-world asset (RWA) tokenization as part of their future offerings.

In March 2025, Mantra Chain launched a $108.8 million fund to accelerate tokenization infrastructure, signaling strong market demand and regulatory hesitation.

The Bank for International Settlements (BIS) has also cautioned against private stablecoins lacking institutional backing, suggesting that tokenized versions of commercial bank money may be more effective in modernizing finance without compromising oversight.

In the U.S., some banks are reportedly delaying crypto custody rollouts to reassess compliance frameworks and engage legal counsel, according to multiple legal advisory firms tracking the space.

At the same time, digital asset firms offering third-party custody may see new demand, provided they can meet FDIC-style reporting and accountability thresholds.

Through this advisory, the FDIC seeks to ensure that digital asset custody is adopted responsibly, rather than recklessly, by following through with a compliance-first approach that integrates with long-standing banking regulations.

As crypto moves from retail speculation to institutional integration, custody becomes a critical battleground. The question is no longer whether banks will hold crypto but how they’ll do it safely, transparently, and within a regulatory perimeter.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.