Amid the flurry of activity in the early stages of 2025 and the new administration, we are seeing a return to many of the regulatory perspectives of the first Trump administration. For financial services, this generally means a lighter-touch approach to supervision and a focus on a few specific topics, which are setting up 2025 to be an inflection point for banking regulation in the United States.
Of all the activity to date, three actions stand out to us. First, an expedited bank merger review process. Second, a reiteration of previously issued guidance on providing traditional bank services to digital asset clients. Third, a review and withdrawal of certain regulatory proposals and rulings from the last administration.
Bank merger policy – Back to the way it was
Despite changes in 2024 with respect to bank merger policy and antitrust review at the Department of Justice, the FDIC and the OCC, bank merger review process is reversing course. Indeed, in early March, the Board of Directors of the FDIC approved a proposal to rescind its 2024 Statement of Policy on Bank Merger Transactions.
Additionally, based on comments from FDIC officials on the bank merger review process and the focus of the new administration on economic growth and a more flexible regulatory approach, we expect a pivot in the bank merger review process to achieve a more streamlined review process for most bank merger applications. This pivot will provide support in mitigating bank merger execution risk in an environment ripe for consolidation.
Digital asset activities – Return to prior guidance
On March 7, 2025, the OCC issued Interpretive Letter 1183, OCC Letter Addressing Certain Crypto-Asset Activities, reiterating the OCC’s prior guidance regarding the activities in which national banks may engage related to crypto assets, including crypto asset custody, certain stablecoin activities and participation in independent node verification networks such as distributed ledgers.
Each of these activities were previously addressed and permitted pursuant to OCC Interpretive Letters 1170, 1172 and 1174, respectively. Critically, Interpretive Letter 1183 also rescinds Interpretive Letter 1179, which required national banks to receive a “supervisory nonobjection and demonstrate that they have adequate controls in place before they can engage in these cryptocurrency activities.”
Additionally, “consistent with Interpretive Letter 1183,” the OCC withdrew its participation in the joint statement on crypto-asset risks to banking organizations and the joint statement on liquidity risks to banking organizations resulting from crypto-asset market vulnerabilities.
Together, these actions – Interpretive Letter 1183, the recission of Interpretive Letter 1179, and the withdrawal from the two joint statements on specific risks to banking organizations related to crypto-asset activities – result in a return to the previous approach to these activities by national banks. We expect this to support continued expansion of the market for banks to engage in crypto activities.
Consistent with OCC precedent, the existing policy of the OCC acknowledges that these crypto-related activities are a customary expansion of a national bank’s traditional role as a financial intermediary and that any such activities must continue to be “developed and implemented consistently with sound risk management practices.”
Retreat on certain proposals
Finally, we have seen a number of proposed regulations already withdrawn by recent FDIC action. For example, on March 3, the FDIC’s Board of Directors approved the withdrawal of three outstanding proposed rules relating to brokered deposits, corporate governance and the Change in Bank Control Act. The FDIC Board also withdrew authority for staff to publish a proposed rule related to incentive-based compensation arrangements that was previously approved but never published.
Some proposals should expect material changes in the future, including the FDIC’s Sign and Advertising Rule, for which the FDIC Board delayed the compliance date regarding certain provisions in light of expected proposals to modify the regulation. Other regulatory initiatives we expect to see material changes to in reproposal are the “Basel III Endgame” proposal, proposed long term debt requirements, liquidity requirements, and the stress-testing framework of the Federal Reserve.
What is new? Digital asset openness especially
Despite many of these actions resulting in a return to preexisting policy, industry observers expect new proposals to encourage economic growth, support lending markets and expand traditional bank activities. The administration’s perspective on government efficiency may also create an environment for significant shifts in bank regulation and policy; however, in the immediate term, much of the action has focused on a retreat from proposals banks generally viewed as costly and/or burdensome to implement.
Perhaps the most “new” activity will be with respect to bank activities related to digital assets, cryptocurrencies and stablecoins. We anticipate an openness to innovation and technology with this administration and the individuals that will be leading the federal bank regulatory agencies, especially as the administration seeks to become the center of the crypto universe.
This commentary is the opinion of Joseph E. Silvia, partner at Duane Morris LLP and former counsel to the Federal Reserve Bank of Chicago.
