Bitcoin Soars as Trump’s Crypto Plans Spark Wall Street ‘Panic’

The Federal Reserve has withdrawn guidance implemented during the Biden administration that had deterred Wall Street banks from engaging with cryptocurrencies. This regulatory shift comes as Bitcoin prices have surged toward $100,000, rebounding significantly from April lows of around $75,000, amid increasing institutional investment in digital assets.

“The Board is rescinding its 2022 supervisory letter establishing an expectation that state member banks provide advance notification of planned or current crypto-asset activities,” the Federal Reserve Board of Governors stated in an official announcement. This move eliminates the requirement for banks to obtain pre-approval for crypto ventures, though such activities will still be monitored through standard supervision processes.

The Federal Reserve joins the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) in withdrawing similar statements that had cautioned banks about volatility, legal uncertainty, and liquidity risks associated with cryptocurrency services. Analysts from Tagus Capital noted that “this move reflects the Trump administration’s increasingly pro-crypto stance including reduced regulatory enforcement, support for a national bitcoin reserve and the appointment of a Securities and Exchange Commission (SEC) chair, Paul Atkins, known for backing digital assets.”

Wall Street’s Growing Crypto Adoption

The regulatory relaxation has been welcomed by cryptocurrency advocates who had criticized the Biden-era rules as creating a “clandestine Operation Choke Point 2.0” that effectively pushed banks away from cryptocurrency businesses. Michael Saylor, Strategy founder, responded to the Fed’s announcement on X, stating: “Banks are now free to begin supporting bitcoin.”

Following the launch of spot Bitcoin exchange-traded funds (ETFs) on Wall Street over the past year, financial institutions have been increasingly eager to offer cryptocurrency services to their clients. This week, Bitcoin ETFs recorded their strongest performance day since January, as investors shifted toward higher-risk assets following reports that the U.S. and China are seeking to ease global trade tensions.

Regulatory Limitations Remain

Despite this significant regulatory relaxation, the Federal Reserve’s announcement did not address changes to policies regarding master accounts for crypto-focused banks. Institutions like Custodia and Kraken Financial have spent years lobbying for direct access to the Fed’s services through master accounts.

Market observers are closely watching how this regulatory shift will influence broader economic policies. Joel Kruger, Market Strategist at LMAX Group, noted in his comments that “markets will closely monitor US administration policies and Federal Reserve actions,” adding that attention remains focused on interest rates, recession risks, and potential quantitative easing. “Despite signs of the president softening his trade stance, uncertainty persists about the U.S. economy’s trajectory. Pressure is mounting on the Fed to cut rates more aggressively, which could trigger broader U.S. dollar outflows,” Kruger explained.

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