For crypto banking, it's go time! Or is it? .The Federal Reserve, FDIC, and OCC recently issued a joint statement on risk-management considerations for crypto-asset safekeeping. The guidance underscores the need for robust risk management practices and specifies that banks adhere to established protocols, legal requirements and compliance frameworks when offering cryptocurrency custody services.That may all sound like everyday blocking and tackling to compliance and risk professionals, but as in most things, the devil is in the details.The guidance highlights several areas requiring specialized expertise. Banks must maintain full control over cryptographic keys, ensuring no other party can access them while under custody. They need to understand the technical, operational, strategic, market, legal and compliance considerations for each cryptoasset. Customer agreements should clearly outline duties and responsibilities, addressing issues like on-chain governance, forks, airdrops, storage methods and smart contracts. Banks must also demonstrate adequate ongoing technical knowledge to manage crypto-asset safekeeping complexities.This joint guidance is part of a broader regulatory shift providing clearer supervisory frameworks for banks' digital asset engagement. Building on this momentum, the OCC reaffirmed on March 7, through Interpretive Letter 1183, that crypto-asset custody and certain DLT and stablecoin activities are permissible for national banks. Shortly after, on March 28, the FDIC issued Financial Institution Letter (FIL-7-2025), confirming banks can engage in permissible crypto-related activities under existing banking laws without prior approval.These regulatory moves mark a significant shift from traditional, cautious stances, responding to growing digital asset demand and the need for competitive banking in a rapidly changing global market. With this newfound regulatory clarity comes both opportunity and responsibility.The allure of high profitsThe cryptocurrency market's potential for substantial returns naturally attracts both retail and institutional investors. By engaging in crypto activities, banks can tap into new revenue streams, offer innovative products and attract tech-savvy customers. However, this lucrative opportunity comes with a complex web of risks that demand careful consideration.Inherent risksChief among these concerns is cryptocurrency market volatility, which can lead to significant financial losses in remarkably short timeframes. Beyond market risks, the evolving regulatory landscape exposes banks to potential legal and compliance challenges. Cybersecurity threats compound these concerns, as cryptocurrencies remain prime targets for increasingly sophisticated hackers. Banks must carefully weigh these multifaceted risks against potential rewards when crafting their approach.Potential consumer impactsThese risk considerations extend directly to how banks' crypto-related decisions affect their customers. On the positive side, crypto services provide greater access to financial products, particularly benefiting regions lacking traditional banking infrastructure. Cryptocurrencies also facilitate cheaper cross-border transactions and remittances, enhancing financial inclusion globally. Yet these benefits must be balanced against the serious consumer protection concerns arising from high volatility and fraud potential, requiring banks to implement robust safeguards.Regulatory challengesProtecting consumers while capitalizing on crypto opportunities requires navigating an increasingly complex regulatory landscape. Banks must implement stringent AML and KYC measures to prevent financial crimes and ensure transaction legitimacy. They need to adhere to consumer protection laws while providing clear risk disclosures that help customers make informed decisions. Additionally, banks must navigate varying jurisdictional requirements for taxation and reporting, as crypto tax treatment differs significantly across locations. Successfully managing these regulatory challenges requires coordinated efforts across multiple organizational levels.The role of the board of directorsAt the highest level, the board of directors establishes critical parameters for crypto engagement. They define strategic direction, ensuring any crypto initiatives align with the bank's overall mission and goals. The board must carefully approve risk appetite, balancing potential rewards with associated risks in a way that protects shareholder value. Beyond initial approval, they provide ongoing oversight and hold management accountable for implementation and compliance, ensuring robust risk management practices remain in place as the crypto landscape evolves.The role of the chief risk officerWorking within board-established parameters, risk officers translate strategic direction into operational reality. They develop comprehensive risk management frameworks aligned with business strategy and approved risk appetite. Through regular assessments, they identify operational, financial and reputational risks emerging from crypto activities. Risk officers then develop and implement mitigation strategies consistent with industry best practices, ensuring regulatory compliance while providing regular reports on evolving risk profiles to leadership and regulators. Their work forms the backbone of safe crypto operations.The role of the chief compliance officerComplementing risk management efforts, compliance officers ensure all crypto activities meet regulatory requirements. They create and manage compliance programs specifically tailored to crypto activities, aligning with both external regulations and internal policies. Through regular risk assessments, they proactively identify compliance vulnerabilities before they become issues. By providing targeted training and guidance, compliance officers foster a culture where compliance becomes second nature. They continuously monitor adherence to laws, regulations and policies while preparing detailed reports that keep senior management informed of the compliance landscape.Position your bank for successWith clear regulatory guidance and defined organizational roles, banks must now take decisive action to succeed in the crypto landscape. First, evaluate readiness by conducting thorough assessments of current capabilities including technical infrastructure, risk frameworks, and compliance programs, identifying and addressing any gaps. Second, develop a comprehensive strategic plan defining clear objectives, determining appropriate service scope and establishing realistic implementation timelines that align with institutional mission and risk appetite. Third, engage all relevant stakeholders — from board members to frontline staff — ensuring everyone understands both the risks and opportunities crypto presents through targeted training and open communication.By taking these coordinated steps, your bank can confidently navigate crypto market complexities, capitalize on emerging opportunities, and maintain the strong compliance and risk management posture regulators expect. The regulatory green light is shining — ensure your bank is ready to proceed with both confidence and appropriate caution.Elaine Duffus is a senior specialized consultant with Wolters Kluwer Compliance Solutions. She can be reached at elaine.duffus@wolterskluwer.com.
