Former FDIC executive confirms: Banks are partnering with FinTech companies to expand their cryptocurrency and blockchain strategies

Recently, senior FDIC official Barrage pointed out during a House hearing that U.S. banks are accelerating cooperation with FinTech companies and entering the crypto market through tokenized deposits and third-party services.

Banks begin to enter the crypto market via FinTech

Alexandra Steinberg Barrage, a senior executive at the former Federal Deposit Insurance Corporation (FDIC), said at the end of May during a U.S. House hearing of the Digital Assets, Financial Technology and Artificial Intelligence Subcommittee that U.S. banks are quickly partnering with FinTech companies to expand their footprint in cryptocurrency and blockchain services.

She noted that many banks have already started building digital asset custody, on-chain financial services, and crypto trading capabilities through third-party service providers. Some banks are also collaborating with crypto exchanges to enable customers to buy, sell, and hold cryptocurrencies directly through their banking relationships.

Barrage said that the key directions many banks are currently prioritizing include digital asset custody, on-chain activity, and AI technology integration. Traditional financial institutions are gradually incorporating crypto services into their existing financial product frameworks, rather than viewing them solely as high-risk new markets.

Tokenized deposits become a core strategy for large banks

Barrage also said that “tokenized deposits” have become an important industry area that banks have actively invested in in recent years. Tokenized deposits refer to converting commercial bank deposits into digital forms on the blockchain, allowing funds to circulate and settle on-chain in real time while maintaining the bank’s regulatory and compliance framework.

She pointed out that several major financial institutions have begun testing related technologies, hoping to improve the efficiency of cross-border payments, shorten settlement times, and build 24/7 payment capabilities.

As global financial markets continue to show growing interest in blockchain-based payment infrastructure, banks also hope to preserve their advantages in deposit systems through on-chain technology while improving the efficiency of financial services. Compared with crypto finance models that are completely detached from the banking system, tokenized deposits are more readily accepted by regulators.

Banks reduce crypto business risk through cooperation models

Barrage said that, currently, most banks generally do not build complete crypto infrastructure themselves; instead, they reduce risk and technical barriers through cooperation models.

She noted that many FinTech companies are responsible for custody, clearing, compliance, and on-chain technology, while banks handle regulation, risk management, and customer relationship management. This model is quite similar to the Banking-as-a-Service architecture that has emerged in recent years.

Through this kind of cooperation, banks can roll out digital asset services more quickly while avoiding the prohibitively high costs of building their own technology and compliance requirements.

She also mentioned that, at present, some banks have publicly established partnerships with exchanges, hoping to provide crypto-related services through regulated channels. This shows that crypto finance is gradually entering mainstream financial infrastructure and is no longer limited to crypto-native markets.

Small and medium-sized banks remain relatively conservative

However, Barrage also acknowledged that U.S. small and community banks are still relatively cautious. She said that since the banking industry stress events of 2023 and 2024, some smaller financial institutions have become more conservative about FinTech cooperation, especially due to concerns about regulatory and risk management issues.

In recent years, the number of community banks engaging in crypto and FinTech cooperation has clearly declined. However, she believes that if they have sufficient internal expertise and risk-control frameworks, some smaller banks still have the capability to manage such cooperation effectively.

This hearing focused on how banks can upgrade financial infrastructure through third-party partnerships. Barrage’s remarks also once again reflect that the U.S. financial industry has begun incorporating blockchain and digital assets into its long-term development direction, and is advancing related services through cooperation models within regulatory frameworks.

This article is compiled by Crypto Agent from information provided by various parties, and reviewed and edited by “Crypto City.” It is currently in the training stage and may contain logical biases or information errors. The content is for reference only and should not be considered investment advice.