TD Cowen: Under Trump, banks will have an easier time working with crypto companies

According to a new report from investment bank TD Cowen, the Donald Trump administration could significantly improve relations between crypto companies and banks. However, one should not expect a complete reversal of regulatory policies.

Banks, inevitably, remain hostage to anti-money laundering rules and the requirements of the Bank Secrecy Act. Even if Trump's regulators turn a blind eye to the convergence of traditional finance with the crypto sphere, many bankers will continue to play it safe. Some will decide that the game is not worth the candle, while others will embrace new opportunities with open arms.

However, according to TD Cowen's leading analyst Jaret Seiberg, the convergence of traditional finance with the crypto sphere is a done deal. Time heals, and banks will gradually come to terms with cryptocurrency risks. As the crypto market model of 2022 and the collapse of Silvergate Bank fade into the past, they will look more calmly at the prospects of cooperation.

Banks might be allowed to issue stablecoins — this would provide the proper control over reserves and keep money within the banking system. Some financial institutions might be granted the right to trade crypto assets analogously to stocks — especially if Congress passes new laws regarding the structure of the crypto market. There might also be a relaxation of restrictions on loans secured by cryptocurrencies.

However, not everything is so smooth in the state of Denmark. Leading crypto companies, including Coinbase, have long been sounding the alarm about active attempts by U.S. banking regulators to restrict crypto firms' access to the traditional financial system. Last year, Coinbase hired research firm History Associates Incorporated to file a lawsuit against the Federal Deposit Insurance Corporation (FDIC). The goal is to uncover the notorious 'pause letters' that demanded banks cease activities related to cryptocurrencies.

Last week, the FDIC released documents with minimal redactions. It was revealed that in 2022–2023, banks indeed received recommendations to halt direct involvement in crypto projects. However, the letters did not demand the cessation of services to crypto firms, contrary to industry representatives' claims of mass 'debanking.'

Coinbase's Chief Legal Officer Paul Grewal believes the documents indicate coordinated attempts to halt a wide range of crypto activities — from basic Bitcoin transactions to more complex products.

Last year, Trump stated that he would not allow banks to 'strangle' crypto firms. Some industry leaders hope that immediately after the inauguration on January 20, he will issue the appropriate executive order.