Will the easing of crypto regulations by the Federal Reserve and SEC, along with institutional funding and tokenization, drive the recovery of the crypto market?

Recently, the Federal Reserve and the U.S. Securities and Exchange Commission (SEC) have announced multiple policy adjustments related to cryptocurrencies, which the market interprets as a clear shift in the regulatory stance towards digital assets in the United States. These measures focus on lowering barriers for institutional participation, promoting tokenization development, and improving overall market liquidity, sending positive signals for the medium- and long-term growth of the crypto industry.

On the Federal Reserve side, it has withdrawn the restrictive policy statements issued in 2023 and introduced new guidelines allowing regulated and unregulated member banks to engage in cryptocurrency-related activities. The Fed explicitly views cryptocurrencies as innovative technologies to enhance banking efficiency and service capabilities, meaning banks will be able to offer a broader range of services related to digital asset custody, access, and tokenization in the future.

Meanwhile, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have also relaxed restrictions. The FDIC now permits banks to manage crypto assets and provide tokenized deposit services without prior approval, while the OCC explicitly states that banks can hold Bitcoin, Ethereum, Solana, and XRP to support blockchain operations and settlement needs. These policy adjustments significantly reduce compliance barriers for traditional financial institutions entering the crypto market.

Regarding the SEC, its Division of Trading and Markets has issued new guidance on crypto asset custody, clarifying that broker-dealers must have actual control over their clients’ crypto assets, including private key management, asset transfer capabilities, and risk assessment and contingency plans for blockchain-related risks. These rules strengthen investor protection and provide clearer compliance frameworks for institutions.

Overall, the policy signals from the Federal Reserve and SEC are expected to boost institutional confidence in digital assets, improve market liquidity, and accelerate the tokenization of real-world assets (RWA). However, in the short term, market sentiment remains cautious. Bitcoin continues to face pressure, and declining trading volume indicates that trading activity has not yet significantly rebounded.

In general, these policy adjustments are more likely to lay the foundation for a medium- to long-term recovery of the crypto market rather than trigger an immediate price reversal. With increased institutional participation and infrastructure improvements, the crypto market may gradually move toward a more mature and compliant development stage.