In a move that has sent ripples through the financial sector, three prominent U.S. federal agencies have spotlighted key risks that banks face when diving into the world of crypto custody. This latest advisory, dated July 15, 2025, underscores the ever-present challenge of liability—specifically, the looming threat of being held accountable if crypto assets go astray.
The Liability Conundrum
What’s the deal with this liability issue? Well, it’s simple yet complex. Banks stepping into crypto custody roles might find themselves on the hook for any losses of digital assets under their care. And that’s no small concern. According to a joint statement from the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, the risk isn’t just theoretical. “The digital asset space is fraught with unique challenges that traditional financial institutions aren’t accustomed to navigating,” says Laura Nguyen, a financial analyst specializing in digital assets. “The potential for cyber theft, operational mishaps, and even insider fraud makes liability a very real threat.”
Banks are no strangers to risk management. Still, the digital currency landscape is a different beast. The decentralized nature of cryptocurrencies, while appealing for its autonomy, introduces a layer of unpredictability that traditional assets don’t have. And when things go wrong—if a wallet gets hacked or private keys are lost—the finger-pointing begins, often landing squarely on the custodians.
Navigating Regulatory Waters
Here’s where things get interesting. The advisory comes at a time when regulatory frameworks for digital currencies are still in flux. The lack of clear guidelines leaves banks in a precarious position, attempting to balance innovation with caution. “We’re in a regulatory gray zone,” admits John Carter, a compliance officer at a major U.S. bank. “There’s an eagerness to harness the potential of digital assets, but without clear regulations, we’re essentially walking a tightrope.” For a deeper dive into the regulatory implications, see our coverage of the House gearing up for a crypto market structure vote.
The agencies’ statement serves as both a warning and a call to action. Banks are encouraged to bolster their risk assessment protocols and ensure they have robust security measures in place. This includes everything from advanced encryption techniques to regular audits of digital assets.
A Glimpse Into the Future
So, where does this leave us? The crypto market continues to evolve at breakneck speed, showing no signs of slowing down. The allure of digital assets is undeniable—just look at the meteoric rise of platforms like Lido and EigenLayer, or the monumental shift brought about by Ethereum’s The Merge. Yet, the path forward is anything but clear-cut. As explored in our recent coverage of Germany’s top banks managing $4.5 trillion+ in assets going crypto, the global financial landscape is witnessing a significant shift towards digital assets.
As banks grapple with these risks, there’s a growing call for more definitive guidance from regulators. “We need a framework that provides clarity without stifling innovation,” argues Emily Tran, a blockchain policy advisor. “It’s a delicate balance, but one that’s crucial for the long-term stability of the digital asset market.”
In the meantime, banks eyeing crypto custody must tread carefully, weighing the potential rewards against these outlined risks. As the digital frontier expands, the financial world watches and waits—pondering what the future holds for banks in the age of cryptocurrency. Will they adapt, innovate, and thrive? Or will the specter of liability hold them back? Only time will tell, but one thing’s for sure: the crypto custody conversation is far from over.
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This article is based on: US Federal agencies outline key risks for banks eyeing crypto custody
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
