U.S. bankers are adopting a cautious stance on cryptocurrencies, even with the prospect of friendlier regulations under a future Donald Trump presidency. This sentiment was evident at the Reuters NEXT conference held in New York this week.
Although Trump has courted the crypto community with promises to be a “crypto president” and to relax the current administration’s strict stance, leading financial institutions are hesitant to aggressively enter the volatile digital asset market.
“The regulatory framework has to evolve…and everyone’s speculating as to how that regulatory framework will evolve, but it’s still unclear,” said Goldman Sachs CEO David Solomon.
Solomon indicated that while Goldman Sachs would “evaluate” involvement in prominent cryptocurrencies like Bitcoin and Ethereum if regulations change, current constraints limit their actions in these markets, particularly given the speculative nature of cryptocurrencies.
Robin Vince, CEO of BNY, noted that his firm has started offering cryptocurrency custody services for exchange-traded products while also investing in an array of digital asset services. However, he emphasized the need for appropriate safeguards and rigorous testing through market cycles before pursuing such ventures.
“We’ve seen a couple of cycles already in crypto. We’ll have to see how some of these assets evolve,” Vince stated.
Under the Biden administration, regulations have made it challenging for major banks to hold crypto tokens. Furthermore, accounting guidelines have significantly increased the costs associated with banks providing crypto custody services.
The crypto industry anticipates a shift in policy under a potential Trump administration. They are lobbying for policies intended to promote the widespread adoption of digital assets, including the revocation of SEC accounting guidance and a reduction in regulatory scrutiny of the sector.
Trump has taken steps towards this policy overhaul. He announced his intention to appoint former PayPal executive and crypto advocate David Sacks as the White House “Crypto Czar” and to nominate pro-crypto attorney Paul Atkins as SEC chair. The SEC chair nomination led to Bitcoin’s price surpassing $100,000 for the first time.
However, uncertainty lingers as Trump has yet to announce his banking regulators. Additionally, Michael Barr, the Federal Reserve’s top Wall Street regulator known for his skepticism towards crypto, is expected to serve out his term until 2026. This uncertainty raises questions regarding the speed at which regulatory changes will occur, especially in light of the turmoil in the crypto sector.
Kristin Johnson, a Democratic commissioner at the Commodity Futures Trading Commission, expressed concern that policymakers might overlook the lessons from prior crypto crises, including the collapse of FTX.
“One of my biggest fears for any administration is that they forget the lessons that we were meant to have learned from many previous crises,” Johnson said.
Even with regulatory easing, bankers maintain that client demand will be a key driver of any expansion into the crypto market. Matt Gellene, head of Consumer Investments and Employee Banking & Investments at Bank of America, indicated that while they provide some crypto exposure to clients through exchange-traded funds, interest has not been overwhelmingly large.
Akita Somani, Senior Vice President and Director of Inclusive Growth Strategy at US Bank, noted that while younger, affluent professionals might seek investment options that include digital assets, there has not been “significant demand” observed at US Bank as well. The consensus among the financial institutions is clear: the path forward for crypto integration depends on both regulatory changes, and most importantly, on the actual interest of their clients.
