## Lax regulatory monitoring encourages banking-cryptocurrency transactions
In the ever-evolving world of finance, a notable shift has occurred in the relationship between banks and cryptocurrency. Since January 2021, regulatory bodies have been focusing on compliance, leading to stricter licensing, increased oversight, and a push for control in bank-crypto platform interactions.
SoFi Technologies, a leading player in the financial sector, aims to incorporate crypto or blockchain capabilities into each of its product areas. The company plans to re-enter the crypto business within the next six months, seizing the opportunities presented by this regulatory shift.
Green Dot, a company specialising in money movement, has been fostering close relationships with regulators to consider and bring on new partners. This strategic move provides a practical link between cash services and digital assets, making Green Dot a key player in the burgeoning crypto landscape.
The interest in cryptocurrency is coming from two main verticals: fintech-forward banks that understand the value of crypto assets, and large banks with sizable securities custodial programs. These institutions view cryptocurrency as no different than custodying a stock or a bond, with the main difference lying in the control and maintenance of cryptocurrencies.
Green Dot has partnered with Crypto.com to offer banking and money management tools to Crypto.com's U.S. customers. This partnership will soon see Green Dot offering an interest-bearing savings account for Crypto.com users. Green Dot and Crypto.com share a commitment to maintaining a strong connection with regulators and a similar discipline and rigor when it comes to compliance and regulatory matters.
Regulators will now monitor such activities through the normal supervisory process. This enhanced oversight has resulted in more stringent licensing and registration requirements for crypto wallets and service providers, affecting app availability and bank partnering criteria. For instance, Google Play’s 2025 policy demands crypto wallet apps have official financial licenses such as Money Services Business registration in the US, or Crypto Asset Service Provider registration under the EU’s MiCA regulation.
Enhanced regulatory enforcement on exchanges and platforms has also emphasised KYC/AML compliance, indirectly impacting banks’ anti-money laundering responsibilities. Regulators, especially in the US, have increased enforcement efforts against illicit uses of cryptocurrencies, implicating banks and financial institutions as partners or gatekeepers in these compliance frameworks.
The tighter regulatory environment has pushed fintech and banks towards hybrid financial models that integrate centralised finance (CeFi) with decentralised finance (DeFi), balancing regulatory compliance with innovation. Crypto-friendly payment gateways integrated with stablecoins and KYC/AML compliance are becoming a competitive advantage for banks and fintechs working with crypto assets.
Despite the challenges faced by some banks, such as Vast Bank exiting the crypto business last year due to regulatory challenges, the overall trend shows a positive shift towards formal regulation of crypto-related financial activities. This shift is anticipated in places such as Qatar, where regulatory frameworks are evolving towards clearer rules.
Brian Foster, global head of wholesale at Coinbase, stated that his team has been very busy meeting demand for banks, brokers, and fintechs due to the relaxed oversight on bank-crypto activities. Even before this shift, many large US banks were either behind the scenes with or live with Coinbase in their crypto endeavors, according to Foster.
These developments suggest that the future of banking and cryptocurrency is intertwined, with regulatory bodies playing a crucial role in shaping this relationship. As the landscape continues to evolve, we can expect to see more partnerships, innovations, and regulatory changes in the world of finance and cryptocurrency.
[1]: Source: CoinDesk [2]: Source: Federal Reserve [3]: Source: Consensys [4]: Source: Chainalysis [5]: Source: CoinDesk
- In the financial industry, SoFi Technologies plans to integrate crypto or blockchain capabilities into its product areas, aiming to re-enter the crypto business within the next six months, leveraging the regulatory shift that has occurred.
- Green Dot, a company known for its expertise in money movement, has been cultivating close relationships with regulators to consider new partners, positioning itself as a key player in the expanding fintech-crypto business.
- Regulatory bodies are now scrutinizing and enforcing compliance more rigorously in the crypto finance sector, affecting the app availability and bank partnering criteria for crypto wallets and service providers, such as requirements for official financial licenses like Money Services Business registration in the US or Crypto Asset Service Provider registration under the EU’s MiCA regulation.
