Coinbase Urges US Regulators to Clear Path for Banks in Crypto Market

Coinbase, a leading US-based cryptocurrency exchange, is pushing for clearer regulations in the US to enable banks to offer cryptocurrency custody and trading services, while celebrating recent progress in the UK.

• Coinbase urges US regulators for regulatory clarity
• Approval from UK’s FCA makes Coinbase largest VASP in the UK
• Current federal laws allow banks crypto activities, but ambiguity hinders participation

Coinbase has reached out to the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), requesting explicit permission for banks to hold and trade cryptocurrencies (crypto custody and trading services) for their customers. The current regulatory ambiguity, Coinbase argues, is the biggest hurdle preventing banks from fully engaging with the crypto market. Despite existing federal laws not prohibiting banks from participating in crypto activities, the lack of clear guidelines keeps them on the sidelines. Faryar Shirzad, Coinbase’s chief policy officer, emphasized the need for banks to be able to work with qualified third-party providers to meet their customers’ crypto needs. He stated,

“We need clarity that banks can work with qualified third-party providers to serve their customers’ crypto needs.”

Imagine trying to invest in cryptocurrency through your local bank, only to be turned away due to unclear rules. Coinbase’s push for regulatory clarity in the US comes at a time when the crypto industry is increasingly seeking to integrate with traditional financial systems. Their efforts highlight the tension between the fast-evolving crypto sector and the more cautious, established banking sector.

However, not all regulatory environments are as challenging. Some countries are adapting their regulatory frameworks to accommodate the potential economic benefits of cryptocurrencies. This contrast in regulatory approaches between the US and the UK underscores the broader debate over how best to regulate the burgeoning crypto industry to foster innovation while protecting investors and maintaining financial stability.

Meanwhile, Coinbase is making strides in other parts of the world. The exchange recently received regulatory approval from the UK’s Financial Conduct Authority (FCA), becoming the largest registered Virtual Asset Service Provider (VASP) in the UK. A VASP is an entity that conducts activities or operations for or on behalf of another person related to virtual assets. Coinbase views this approval as a positive move by the UK towards embracing economic freedom and free markets through crypto regulation. In their statement, Coinbase noted,

“This VASP registration makes Coinbase the largest registered digital assets player in the UK. The UK Government and the FCA are developing welcome regulation for the crypto sector, hopefully joining the growing trend of countries embracing economic freedom and free markets.”

The approval by the UK’s FCA reflects a more welcoming stance towards cryptocurrency, aligning with global trends where some countries are adapting their regulatory frameworks to accommodate the potential economic benefits of cryptocurrencies.

Coinbase believes that cryptocurrencies are crucial technologies that can drive economic growth. They stated,

“Governments around the world are waking up to the fact that crypto fuels economic prosperity. We believe that crypto is the most important technology that can generate growth in the world, and the UK is poised to benefit from this.”

While Coinbase is optimistic about the future of crypto, it’s clear that regulatory hurdles remain a significant challenge. There are concerns about increased centralization and potential regulatory overreach if banks enter the crypto market. Balancing innovation with investor protection will be crucial as the industry evolves.

Furthermore, Coinbase has taken legal action against the SEC and FDIC, accusing them of collaborating to exclude crypto firms from banking services. These lawsuits highlight the ongoing tension between the crypto industry and regulators. Coinbase’s Chief Legal Officer, Paul Grewal, has accused the FDIC of withholding key documents related to its communication with banks about crypto-related restrictions.

Under President Donald Trump’s administration, which began in January 2025, there have been changes to the regulatory environment for crypto. The administration has rolled back policies perceived as restrictive to crypto, including the repeal of an SEC rule requiring banks to classify crypto assets held in custody as liabilities. Additionally, Trump appointed David Sacks as the “White House AI & Crypto Czar,” indicating a more supportive stance on digital assets.

Coinbase’s role as the largest custodian for U.S.-based Bitcoin ETFs further underscores its significant presence in the crypto ecosystem. The exchange has also asked regulators to confirm that state-chartered banks can offer and outsource crypto custody services.

However, Coinbase has criticized a 2020 OCC guideline that they believe has created an unofficial process discouraging banks from engaging in crypto-related activities. They have urged the OCC to withdraw this guidance, adding another layer to their advocacy efforts.

Coinbase is set to testify before the Senate Banking Committee on the issue of “debanking,” where lawmakers will question financial institutions about their policies toward digital asset companies. This upcoming event adds a layer of urgency to Coinbase’s push for regulatory clarity.

While Coinbase’s efforts to integrate crypto with traditional finance are commendable, there’s a valid concern about the potential for increased centralization. If banks fully embrace crypto, it could lead to a scenario where a few large institutions control the majority of crypto assets, undermining the decentralized ethos that many in the crypto community hold dear. Moreover, the involvement of banks could invite more stringent regulations that might stifle innovation.

Despite these concerns, the potential economic benefits of cryptocurrencies are undeniable. Coinbase’s statements about crypto fueling economic prosperity align with broader narratives about the transformative potential of digital assets. The integration of stablecoins by traditional financial players to revolutionize payments is another trend indicating the growing intersection between crypto and traditional finance.

Key Takeaways and Questions

• What is Coinbase asking from US federal banking regulators?

  Coinbase is requesting clearer regulations that explicitly allow banks to engage in crypto custody and trading services, either directly or through third-party providers.

• What is the current state of regulatory uncertainty regarding banks and crypto services?

  Current federal laws permit banks to engage in crypto activities, but regulatory ambiguity has prevented many from doing so.

• Why is regulatory clarity important for Coinbase and the crypto industry?

  Regulatory clarity would enable banks to offer crypto services, potentially increasing the adoption and integration of cryptocurrencies within traditional financial systems.

• What recent regulatory achievement did Coinbase accomplish in the UK?

  Coinbase received approval from the UK’s FCA to become the largest Virtual Asset Service Provider (VASP) in the UK.

• How does Coinbase view the impact of crypto on economic prosperity?

  Coinbase believes that cryptocurrencies are crucial technologies that can drive economic growth, and the UK is well-positioned to benefit from this trend.