Updates: Regulatory Winds Shift in Crypto’s Favor

A wave of regulatory developments around the world this week signaled a more accommodating stance toward cryptocurrencies, even as authorities continue to emphasize investor protection. In the United States, federal and state actions pointed to greater acceptance of crypto in traditional finance, while Australia stepped up oversight to safeguard its markets. Key highlights include:

• U.S. Eases Banking Restrictions: Banking regulators led by the Federal Reserve withdrew prior guidance that had urged extreme caution for banks dealing with crypto, reversing the post-FTX “Operation Chokepoint 2.0” era. The Fed announced banks no longer need special approval to engage in crypto-asset or stablecoin activities, treating crypto services like any other banking activity. This policy reversal – framed as a push to “support innovation” – is a major win for the industry, making it easier for crypto companies to access banking services.
• States Embrace Crypto Reserves: At the state level, Arizona’s legislature approved bills to allow up to 10% of its $31.5 billion in public funds to be invested in Bitcoin and other digital assets. If signed by the governor, Arizona would be the first U.S. state to hold Bitcoin in its treasury reserves – a landmark in government adoption. Dozens of other states are considering similar measures as they race to position themselves as crypto-friendly hubs. Even outside the U.S., nation-states continue to add crypto: El Salvador, for example, recently expanded its Bitcoin holdings despite IMF concerns.
• Australian Oversight and Innovation: Australian regulators moved on both enforcement and reform. Financial intelligence agency AUSTRAC launched a crackdown on dormant crypto exchange licenses to prevent illicit use – warning inactive exchanges to “use it or lose it” or face deregistration. This “blitz” will include publishing a public list of registered exchanges to boost consumer confidence in legitimate providers. On the innovation front, Australia’s Treasury outlined a “fit for purpose” digital asset regulatory framework (including stablecoin oversight) aimed at fostering an innovative Australian digital asset industry, with plans to consult on legislation in 2025.

Overall, regulators appear to be finding a balance between encouraging crypto’s growth and mitigating risks. The U.S. banking policy shift reduces a key friction for institutional crypto adoption, and pro-crypto legislation at the state level indicates widening political support. At the same time, actions like Australia’s exchange audit underscore that investor protection remains paramount. For crypto investors, these developments hint at a more supportive regulatory climate ahead – one where financial authorities integrate digital assets into existing frameworks rather than keeping them at arm’s length.