Banks finally getting serious about crypto
The regulatory landscape flipped after Trump came back. The Fed, FDIC, and OCC all rescinded guidance that made banks treat crypto like radioactive waste. The FDIC said in March that banks can do permissible crypto activities without prior approval. Banks don't need to ask permission anymore.
For years, banks couldn't touch crypto without regulatory scrutiny. Now they can integrate it like any other asset class.
Morgan Stanley's launching Bitcoin, Ethereum, and Solana trading on E-Trade by early 2026. They're partnering with Zerohash for infrastructure and recommending clients cap crypto at 4% of portfolios. With $8.2 trillion in client assets, that's access for millions of E-Trade users who'd never bother with Coinbase. It'll sit next to stocks and bonds in the same account.
Citigroup's building a crypto custody platform for 2026. When banks this size commit to custody, they're betting on institutional demand.
The market dumped $476 billion between October 9-16, but JPMorgan said it was crypto-native traders liquidating leveraged positions, not institutions bailing. Bitcoin and Ethereum ETFs saw modest outflows compared to the broader selloff. Institutions didn't panic-sell.
JPMorgan's data shows institutions hold roughly 25% of Bitcoin ETPs and 18% of all Bitcoin. Their survey found 29% of institutional traders are either actively trading crypto or planning to in 2025, up from 21% in 2024. The sector pulled in $60 billion in net inflows year-to-date, up 50% from May.
The Morgan Stanley and Citigroup branding matters. Retail investors who'd never download Coinbase will use E-Trade. Institutional clients who wouldn't trust a crypto-native custody platform will trust Citi. That's how you bridge traditional finance and crypto.
Trump's executive order in January pushed agencies to support crypto companies' access to banking services. By April, all three major banking regulators withdrew the Biden-era guidance that blocked crypto activities. Banks can finally build infrastructure without regulatory uncertainty killing every initiative.
JPMorgan, PNC, and Goldman aren't asking whether to do crypto anymore—they're figuring out how fast to deploy. Cross-border payments get faster, custody becomes standardized, retail access expands.
The pattern's straightforward: regulatory clarity drives institutional adoption, which drives infrastructure, which drives access. Banks can treat crypto like a legitimate asset class now, and they're moving.
Critics worried about reduced investor protection miss the point. These are regulated banks with capital requirements, insurance, and oversight. That's more protection than unregulated crypto exchanges offered. Morgan Stanley capping allocation at 4% is risk management.
Crypto's moving from fringe to mainstream not because crypto changed, but because regulation did. Banks can finally offer crypto to clients who want it, with the infrastructure traditional finance provides.
Same thing that happened with the gig economy—regulation got out of the way, platforms connected people to services, access expanded. Banks are doing that for crypto now.
Sources: Latham & Watkins, FDIC, Reuters, Yahoo Finance, CoinDesk