As policymakers debate several actions on digital assets policy with significant implications for the future of the U.S. financial system, Washington is arriving at an inflection point.
The question facing Congress, the administration, and financial services regulators is whether the nation should continue supporting its system of Main Street community banking or expose more Americans to the weaknesses and risks posed by segments of the digital assets ecosystem.
The dramatic differences between traditional community banks and crypto entities in serving local communities, protecting consumers, and earning public trust reinforce ICBA’s ongoing call for policymakers to pause crypto policy developments and assess their combined impact on local communities and the economy.
The role of local expertise
The policy debate over digital assets centers on crypto access to Federal Reserve accounts traditionally reserved for banks, whether the Office of the Comptroller of the Currency should grant nonbanks access to its national bank trust charter, and how to apply the GENIUS Act’s prohibition on stablecoin yield to crypto exchanges given the harmful impact of stablecoin yield on community bank lending.
Across the board, these policy questions juxtapose community banks built to serve the citizens and small businesses of their local communities against global crypto conglomerates built to extract wealth from anonymous investors.
For instance, while crypto exchanges have no local presence and therefore cannot tailor their services to meet the unique needs of local communities, locally based service and expertise is the bread and butter of community banks. That means not only making 60% of the nation’s small-business loans and 80% of banking industry agricultural lending, but also promoting access to energy, helping alleviate hunger, and ensuring local schools open on time.
Security and support: personalized service in the digital age
The differences between locally based banking and untethered crypto investing are never starker than on the questions of security and support.
For community bank customers, when problems like a lost password arise, there is a real person who can help. Contrast this with crypto platforms, where if you lose your private keys for your life savings, there is no one who can help you recover your losses.
Here’s a breakdown of some of the key differences between community banks and crypto platforms on issues of convenience, security, and privacy.
| Community banks | Crypto platforms | |
|---|---|---|
| Easy access to my money? | ☑ Yes. Bank online, use mobile banking, or visit your local branch or ATM to pay bills, transfer money, and more. | ⮽ No. Stablecoins must go through an exchange to convert to fiat currency. |
| Insurance? | ☑ Yes. Community banks have FDIC insurance, and no depositor has lost a penny of insured deposits since it was established in 1933. | ⮽ No. |
| Personal service? | ☑ Yes. | ⮽ No. |
| Protection from fraud? | ☑ Yes. Community banks are highly regulated with a long history of protecting against fraud and scams. | ⮽ Not much. Crypto platforms are a frequent vehicle for scammers, with little to no recourse available. |
| Support for my local economy? | ☑ Yes. Community banks are leading small business and ag lenders, and they give back to local communities in many ways. | ⮽ No. Stablecoin issuers and crypto exchanges do not issue loans that support Main Street communities. |
| Stability? | ☑ Yes, with some community banks celebrating over 200 years of service. | ⮽ No. Stablecoin values can fluctuate on secondary markets, while failed crypto companies like FTX have proven they are not stable. |
| Privacy? | ☑ Yes. Community banks must adhere to a strict framework data privacy standards. | ⮽ No. Digital assets transactions on the blockchain are visible to the public. |
Trust from the ground up
These fundamental differences in customer support help explain why community banks lead the banking sector in consumer satisfaction while the banking industry far exceeds the crypto sector in consumer trust.
Community bankers earn trust through long-standing relationships, accountability, and a deep stake in the people and communities they serve. Stability comes from oversight and commitment, not code written by someone you will never meet. That stability, in turn, provides the foundation from which local economies flourish.
By contrast, crypto exchanges and decentralized applications continue to suffer attacks from bad actors that routinely reach billions of dollars in losses. And unlike bank deposits—which banks fund the FDIC to insure—crypto losses receive no such insurance protections. If a crypto platform suffers a cyberattack, users are on their own as bad actors launder their stolen funds and bring the platform to the brink of collapse.
Lack of voter support for policy rewrites
While policymakers debate digital assets market structure and whether to grant bank charters and payment accounts to uninsured entities not subject to key banking regulations, the disparity in trust is increasingly apparent in consumer polling about digital assets policy.
Recent polling from Politico shows that while lawmakers work to advance new crypto policies, Americans continue to trust traditional banks over crypto platforms and broadly do not support policies designed to legitimize crypto platforms. These results square with recent ICBA polling showing strong consumer support for community banks, with 65% of U.S. adults saying policymakers should ensure digital assets policy avoids harming bank lending in local communities.
It is not too late for policymakers to acknowledge the extraordinary risks associated with pending policy actions. That is why ICBA continues urging policymakers to pause new policies on stablecoins, Federal Reserve master accounts, and OCC national trust charters and holistically assess their combined impact on local communities and the broader economy.
Brian Laverdure is ICBA senior vice president of digital assets and innovation policy.