US Financial Firms Mull Over Crypto Expansion, Seek Regulatory Clarity

Despite a more favorable regulatory environment under the Trump administration, including the SEC and OCC providing guidance on crypto activities, major U.S. financial firms like Bank of America, Morgan Stanley, and Charles Schwab are proceeding cautiously with crypto expansion, primarily focusing on small-scale projects and collaborations. While Schwab plans to launch spot cryptocurrency trading and Morgan Stanley aims to build a crypto trading feature for E*Trade, these firms are seeking clearer regulatory guidelines, particularly regarding anti-money laundering rules, before making significant investments in the crypto space due to concerns about thin margins and evolving regulations.

Analysis

U.S. financial firms are cautiously navigating an increasingly permissive regulatory environment for crypto-asset activities, influenced by a favorable stance from the Trump administration and specific enabling actions from key regulatory bodies. SEC Chair Paul Atkins has signaled intentions to overhaul cryptocurrency policies and establish guidelines for crypto tokens. The Office of the Comptroller of the Currency (OCC) now permits U.S. banks to manage, buy, sell, and hold crypto assets for clients, including outsourcing custody services. Regulatory hurdles have been further lowered by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve System withdrawing joint statements that mandated advance notification for crypto activities; the FDIC clarified in March 2025 that supervised institutions can engage in permissible crypto-related activities without prior approval. Additionally, an SEC accounting rule requiring banks to recognize specific liabilities for safeguarding crypto assets was rescinded in January 2025, and an executive order aims to establish a strategic crypto reserve. Despite these supportive regulatory shifts, major institutions like Bank of America (BAC), Morgan Stanley (MS), and Charles Schwab (SCHW) are proceeding with caution. Charles Schwab's CEO, Rick Wurster, acknowledged favorable regulatory signals and the firm plans to launch spot cryptocurrency trading services within the next 12 months, building on its existing offering of spot Bitcoin ETF trading. Morgan Stanley is developing a crypto trading feature for E*Trade, with a target to launch spot trading next year. Bank of America, as stated by CEO Brian Moynihan, is considering launching stablecoins if regulations allow and is exploring a joint stablecoin with other large banks, though discussions are in early stages. These firms uniformly seek greater regulatory clarity, especially regarding anti-money laundering (AML) rules and the precise scope of permissible activities, before undertaking significant expansion. Concerns about the rapidly evolving regulatory landscape and the characteristically thin margins of crypto custody businesses relative to their potential risks contribute to this apprehension, leading to initial steps likely being tentative, involving small pilot programs, collaborations, and modest trading volumes, often through alliances with existing crypto firms for custody operations.

Key Decisions for Investors

• Investors should closely monitor forthcoming U.S. regulatory clarifications on crypto-assets, particularly concerning anti-money laundering (AML) rules, as these will be pivotal for the pace and scale of adoption by major financial institutions such as Bank of America, Morgan Stanley, and Charles Schwab.
• Differentiate investment considerations based on individual firms' crypto strategies; Charles Schwab and Morgan Stanley, with stated plans for direct spot crypto trading services, may present earlier or more direct exposure to the asset class, while Bank of America's current focus on stablecoins reflects a more conservative approach.
• Evaluate the potential impact on these financial firms' risk profiles and profitability, noting that while regulatory tailwinds are present, concerns over thin margins in custody businesses and the complexities of compliance in a rapidly evolving digital asset space could temper near-term financial benefits from these ventures.