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Community Banks and Cryptocurrency

The surge of digital currencies is evident. Terms like bitcoin, crypto, blockchain, and NFTs (non-fungible tokens) have become common terminology in the banking industry. However, community banks have been reluctant to commit to providing crypto-related services, mainly because the bank regulatory environment regarding crypto is still evolving. Nevertheless, cryptocurrencies are here to stay, and community banks can capitalize on cryptocurrency developments. Below are five steps community banks can take to prepare for the evolving crypto environment.

1.    Be intentional about getting educated

While community banks’ impact on crypto is currently limited, community banks should stay informed on digital assets. With a plethora of webinars routinely available in the marketplace, there is no shortage of cryptocurrency-related news; and trends to follow on platforms like Twitter, Reddit, and LinkedIn. Educate yourself and your team on cryptocurrency.

2.    Closely monitor regulatory developments

As cryptocurrencies gain wider acceptance, they have caught the attention of regulators and legislators. Current bank regulatory guidance requires an institution to seek prior approval before offering crypto-related services and employ appropriate measures to effectively manage risk and operate in a safe & sound manner. More precise and robust regulatory guidance is expected in the future. Closely monitor regulatory and legislative developments as more guidance and oversight will emerge, requiring additional due diligence.

3.    Conduct your due diligence

With the rise in popularity of cryptocurrencies, chances are your customers are buying them with their bank accounts. Community banks need to monitor accounts for cryptocurrency activity. Engage your risk and compliance officers to establish a process to track and assess crypto asset activities and associated risks. Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks was issued by the bank regulatory agencies in August of 2021 and is an excellent resource for community bankers.

4.    Firm up your long-term digital payment strategy

Omnichannel use of digital payments continues to grow over time. Cryptocurrencies can be used as a payment mechanism. An individual can make a payment to another individual in a cryptocurrency recorded on a blockchain. Community banks can be best prepared for the shift by examining their digital strategy, including updating any systems to adapt and handle change. Examine your current technological capabilities, make sure your data is cleaned and in place, and your system can handle advanced digital payments. If necessary, seek expert advice on digital delivery.

5.    Engage your trusted advisors

Most banking staffs are not well-versed in crypto and are hesitant to recommend it to clients. There is no industry standard for certification. Therefore, your team must engage trusted advisors to evaluate cryptocurrency opportunities appropriately and maneuver the regulatory challenges. Communicate with your audit, financial, regulatory, and legal advisors early and often. Engage in core vendor discussions. Listen to what is going on in your favorite industry association, including Blockchain-specific industry initiatives.


While cryptocurrency represents a new frontier for community banks, it will undoubtedly impact core banking vendors in the coming years, and community banks will ultimately provide such services to meet the needs of their customers. There is a risk of completely ignoring new technologies, just as with new market conditions and customer expectations.  In the coming days, bankers should expect the crypto industry to face more regulations. Your community bank can be ready by being intentional about getting educated, conducting due diligence, and seeking expert advice on creating a technology-driven roadmap.

Key Takeaways

  • Be intentional about getting educated
  • Closely monitor regulatory developments
  • Conduct your due diligence
  • Firm up your long-term digital payment strategy
  • Engage your trusted advisors