SUNANDO ROY – On Banking, Finance and Society

As digital assets continue their journey from speculative novelty to legitimate financial instruments, global regulators are defining the parameters within which traditional banks can engage with crypto-assets. A clear pattern has emerged across major financial jurisdictions—each allowing banks to provide custody and agency services for crypto-assets, albeit under distinct supervisory expectations. This article provides a concise overview of how the United States, European Union, United Kingdom, Singapore, and Hong Kong are shaping the regulatory landscape for banks venturing into the crypto space.

In the United States, the regulatory framework remains a patchwork of federal and state regimes. The Office of the Comptroller of the Currency (OCC) has affirmed that nationally chartered banks may provide crypto custody services if done safely and soundly, supported by interpretive letters confirming permissibility. The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve have also clarified risk management expectations for crypto-related activities. State regulators, notably the New York Department of Financial Services (NYDFS), offer alternative state-level trust charters. The common thread is a focus on prudential oversight: robust governance, AML/CFT compliance, operational resilience, and segregation of client assets. Banks can act as custodians, but supervisory cooperation and strict compliance remain essential.

The European Union is pioneering harmonization through the Markets in Crypto-Assets Regulation (MiCA), which establishes a pan-European licensing framework for crypto-asset service providers (CASPs), including custodians. Banks offering crypto custody must comply with MiCA’s prudential, organizational, and consumer protection requirements while navigating potential overlaps with existing financial legislation such as the Payment Services Directive (PSD2). MiCA introduces clear standards for safekeeping, segregation, and capital adequacy, offering regulatory certainty for banks while maintaining investor protection. The EU’s unified approach contrasts sharply with the U.S. fragmentation, signaling a maturing market infrastructure.

In the United Kingdom, post-Brexit policy independence has driven the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to develop a bespoke regime for crypto custody and stablecoins. The FCA’s consultation paper (CP25/14) outlines proposals for safeguarding “qualifying cryptoassets,” mirroring the client asset protection standards of traditional finance. The Bank of England has also weighed in on systemic stablecoins used as payment mechanisms. UK banks can therefore engage in crypto custody but must comply with emerging safeguarding, registration, and conduct standards, reinforcing operational resilience and consumer confidence.

Singapore, under the Monetary Authority of Singapore (MAS), has integrated crypto regulation within its Payment Services Act (PSA). The PSA treats custody of digital payment tokens (DPTs) as a regulated service, requiring licensing and adherence to stringent safekeeping, segregation, and AML/CFT standards. MAS has also imposed investor protection measures and technology governance expectations for DPT service providers. The framework is facilitative but uncompromising on safeguards, balancing innovation with systemic stability. Banks entering the crypto custody business in Singapore must therefore prioritize local licensing and compliance with MAS’s risk and operational protocols.

In Hong Kong, the Hong Kong Monetary Authority (HKMA) has clarified that authorized institutions may provide virtual asset (VA) custody under the Banking Ordinance, supported by detailed supervisory circulars. The HKMA expects strict governance, AML/CFT compliance, and technology risk management, including clear client disclosures and asset segregation. Hong Kong’s approach integrates prudential oversight with flexibility, reflecting its goal of positioning itself as a leading regulated digital asset hub in Asia. Banks are allowed to provide custody and even staking-related services under defined risk management expectations.

Together, these regimes signal convergence toward regulated participation of banks in crypto markets. Each jurisdiction balances innovation with prudential safeguards, consumer protection, and systemic stability. For banks, the path forward demands rigorous compliance, strong technology governance, and proactive engagement with supervisors.

Table 1: Comparative Overview of Bank Entry into Crypto Custody and Agency Roles

The global regulatory trend is clear: banks are being ushered into the crypto ecosystem, but only under mature, risk-based supervisory structures. While the EU and UK lead with structured regulatory reform, Asia’s major hubs—Singapore and Hong Kong—are leveraging licensing frameworks to foster responsible innovation. In the U.S., meanwhile, fragmented oversight continues to shape a cautious yet evolving environment. Across all jurisdictions, the entry of banks into the crypto space is not merely a matter of permission—it is a test of governance, prudence, and credibility in bridging traditional and digital finance.

References

• Office of the Comptroller of the Currency. Interpretive Letter #1170: Authority of a National Bank to Provide Cryptocurrency Custody Services for Customers. Washington, D.C., 2020.
• Federal Deposit Insurance Corporation. Statement on Activities Involving Crypto Assets. Washington, D.C., 2023.
• European Commission. Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA). Brussels, 2023.
• Financial Conduct Authority. Consultation Paper CP25/14: Safeguarding and Custody of Qualifying Cryptoassets. London, 2025.
• Monetary Authority of Singapore. Payment Services Act 2019 and Related Notices on Digital Payment Token Services. Singapore, 2024.
• Hong Kong Monetary Authority. Supervisory Policy Manual: Authorized Institutions’ Interface with Virtual Assets and Virtual Asset Service Providers. Hong Kong, 2023.