Banks Navigate Digital Asset Boom, Regulatory Shift Amid Economic Headwinds

We’re not quite at the halfway point of the year — that will come June 30 — but the long weekend offers time to pause and reflect on some significant developments within banking. 

In just the past few months, and in change fomented by a new administration in Washington, the landscape has been defined by technological upheaval, regulatory flux and a stubbornly uncertain economic outlook.

And that’s covering the period from January to May. Yet industry’s mood is cautiously optimistic — even amid groundswells of volatility. 

Among the most striking transformations is the mainstreaming of digital assets, which has been front and center over the last few weeks. Bitcoin’s price surge past $100,000 earlier this year was more than a speculative milestone; it marked a new era of integration between crypto and traditional finance.

JPMorgan Chase, long a crypto skeptic, now allows clients access to Bitcoin ETFs.

“We are going to allow you to buy it,” CEO Jamie Dimon said recently, even as he maintained his personal reservations. “We’re not going to custody it. We’re going to put it in statements for clients,” he said. This pivot underscores the growing demand for digital assets among institutional and retail clients alike.

FinTechs are doubling down as well. In one example, SoFi CEO Anthony Noto said: “We’re preparing to re-enter the cryptocurrency sector, from which we had to withdraw. Our goal is to allow our members to invest in cryptocurrencies once again … incorporating genuine crypto or blockchain capabilities across all our product areas.”

The regulatory climate is enabling this return, with the U.S. rolling back some restrictions and Congress advancing the GENIUS Act — a stablecoin framework mandating full reserve backing, regular audits and strict compliance measures. In Europe, MiCA regulation now provides similar clarity, opening the door for banks to issue or support stablecoins as custodians or liquidity providers.

Yet, as PYMNTS Intelligence noted, risk management remains the linchpin for institutional adoption. “It’s about providing an additional option. Where stablecoins offer superior benefits, customers will naturally gravitate toward them,” said FV Bank CEO Miles Paschini. The sector’s maturation, PYMNTS found, “could ultimately mean embracing risk not as a deterrent, but as a design challenge.”

As always, much of what banks do — where they lend, what’s earned on deposits, how net interest margins fare — depends on interest rates. 

Banks are also recalibrating for a new interest rate regime. The Federal Reserve is expected to cut rates three more times this year, but the benchmark will remain at its highest since 2008 — keeping borrowing costs elevated.

According to EY’s Global Banking Outlook, loan growth is forecast to rebound to 6% in 2025, up from just 2% in 2024, as lower rates stimulate demand. However, return on equity is expected to plateau, with profitability gains increasingly dependent on banks’ ability to transform their business models. 

Economic growth, meanwhile, is expected to decelerate. Deloitte projects U.S. GDP growth at just 1.5% this year, with moderating consumer spending and weak business investment clouding the outlook. 

FinTechs remain both partners and threats for traditional financial institutions. According to PYMNTS Intelligence, nearly half of consumers now use mobile banking apps weekly, and digital engagement continues to rise — even as macroeconomic volatility persists. 

“The investment that we do in banks, branches, technology, AI is going to continue regardless of the environment,” JPMorgan’s Dimon told analysts on the company’s most recent earnings call.

FinTechs are also shifting their focus from pure innovation to execution — leveraging AI, embedded finance and compliance automation to drive efficiency and trust. Regulatory compliance, once a cost center, is now a competitive differentiator as AI-powered RegTech solutions automate fraud detection and reporting.

The regulatory landscape is as complex as ever. A new U.S. administration is rolling back some restrictions, but banks still face fragmented rule-making as some agencies are scaled back — in some cases, drastically — as has been the case with the CFPB. 

“We’re headed into an age of regulatory relaxation,” Splitit CEO Nandan Sheth told PYMNTS, “but it will be easier for new FinTechs to come to market.”

Despite the headwinds, optimism is rising. Eighty percent of bankers surveyed by Cornerstone Advisors are upbeat about 2025, buoyed by industry dynamics and the evolving regulatory environment.

The second half of 2025 promises more volatility, but also unprecedented opportunity for those prepared to lead. The only certainty is change — and the banks that move fastest will shape the future of finance.

The post Banks Navigate Digital Asset Boom, Regulatory Shift Amid Economic Headwinds appeared first on PYMNTS.com.