Experienced professionals who have been in the crypto business for over a decade can feel that what happened yesterday is different — a new document from the Federal Reserve effectively breaks down years of barriers between banks and digital assets. Banks used to tread carefully when touching cryptocurrencies, fearing regulatory risks; now, those doubts have dissipated. The path is truly open.

**Details of the Policy Shift**

Remember the atmosphere from two years ago? The banking sector’s attitude toward cryptocurrencies was mostly avoidance. Regulatory frameworks felt like tight shackles. By April this year, the Federal Reserve revoked a batch of old guidance — those "cryptocurrency red zones" established in 2022 and 2023 were all invalidated. Come August, a more significant move was made: they officially canceled the "New Activity Supervision Program." The core of this program was to monitor banks’ activities in crypto custody, digital asset lending, and other new businesses. With the program gone, banks gained more operational freedom.

Federal Reserve officials were quite frank: "New technologies can improve bank efficiency and benefit consumers. We need to give the green light to reliable innovations." This logic is sound. Rather than relaxing regulation, it’s more about shifting from confrontation to collaboration — risks still need to be managed, but bans are no longer the response to technological progress.

**Banks Are Truly Moving**

After the policy loosening, banks responded incredibly quickly. Crypto custody services have become a new competitive hotspot. Bank of New York Mellon has already started action, launching Bitcoin spot custody services and handling futures contract clearing. These large financial institutions, which were once just observers, are now becoming participants.

Why are banks so proactive now? On one hand, regulatory uncertainty has been eliminated. On the other, Bitcoin and Ethereum have shown stable performance over the past two years, with strong demand from institutional investors. Banks see real business opportunities. Custody services generate substantial fees, risks are manageable, and this is an ideal new growth point for banks.

**Market Chain Reactions**

This isn’t just about banks. When traditional financial institutions enter the crypto asset space on a large scale, the overall market liquidity will improve, and price discovery mechanisms will become more efficient. The prices of Bitcoin and Ethereum could receive additional support because these assets now have more institutional buyers. Meanwhile, retail investors can also benefit — gaining access to crypto assets through formal banking channels, with significantly improved risk management.

But don’t be naive to think everything will be smooth sailing from now on. Banks do have more freedom, but regulators won’t completely let go. The responsibility for risk management still lies with financial institutions. The good news is that this new balance allows both sides to find room to operate — banks can do business, innovation can continue, and investors have a safer way to participate.

Over more than ten years in crypto, I’ve learned that policy shifts often mark market turning points. This time, the Fed’s move is like opening a big door. What happens next depends on whether banks and the crypto ecosystem can truly integrate.