The regulatory environment surrounding digital assets has undergone significant transformation under the current administration. Federal agencies have coordinated a series of initiatives designed to facilitate greater banking sector engagement with crypto markets.
According to Alex deLaricheliere, managing director of Financial Institutions & Professional Services at WTW, "Banks have slowly been expanding their suite of digital asset services. Historically, banks have primarily engaged with digital assets through providing core banking products and services to digital asset market participants to varying degrees as well as facilitating customer access to digital asset markets through services."
Legislative measures have reinforced this regulatory shift. The CLARITY Act has gained passage in the House, whilst the US Senate Banking Committee has put forward a draft of the Responsible Financial Innovation Act of 2025. Both pieces of legislation aim to establish comprehensive regulatory frameworks governing digital assets and clarifying expectations for financial institutions operating in this space.
“As digital assets have proved their staying power, more banks are venturing into the space via crypto trading and custody, crypto ETPs and tokenisation. Other areas we see financial institutions engaging in are private crypto funds and crypto-enabled payments,” he said.
Heightened regulatory clarity has encouraged financial institutions to expand their digital asset offerings, yet banks encounter numerous operational and legal challenges in this emerging space. Cybersecurity vulnerabilities, compliance complexities, legal exposure and financial stability considerations present material concerns for institutions seeking to participate in crypto markets.
"Historically, there has been a lack of a clear regulatory framework that prohibited responsible innovation to facilitate responsible customer engagement with digital assets and digital asset technology,” deLaricheliere said. “While some steps have been taken to roll back previous restrictions in this space, there is much work to be done to create a clear, comprehensive framework across the various regulatory agencies."
Banks navigating this space must satisfy demanding compliance obligations centred on anti-money laundering and customer identification requirements. Regulatory expectations encompass traceable logs and robust access controls supported by proactive compliance frameworks.
DeLaricheliere observed that the potential risks posed by the digital ecosystem merit serious consideration. "Historically, the potential risks posed by the digital ecosystem to traditional financial systems have been limited, but as the services provided to crypto intermediaries increase, those risks will increase."
The insurance sector remains inadequately positioned to support banking sector participation in digital assets. Traditional insurance programmes have not extended adequate coverage to digital asset activities, forcing banks to pursue alternative risk transfer mechanisms. This gap reflects broader industry uncertainty about underwriting digital asset exposure.
“Historically, traditional carriers who have underwritten financial institutions' involving traditional assets might be less inclined to take on the risks associated with digital assets,” he said. “In general, insurance carriers have been slower to respond to this shift under the current administration, resulting in some clunky or gap-filled solutions."
