US FED, SEC Just Boost Institutional Adoption, Tokenization, Liquidity, Will Crypto Market Recover?

The US Federal Reserve (Fed) and the Securities and Exchange Commission (SEC) announce key crypto policy changes and guidance, reducing crypto adoption barriers. It provides a major boost for institutional investor participation, tokenization, and overall crypto market liquidity. Will it trigger a Bitcoin and a broader crypto market recovery?

The US Fed Boosts Bank-Crypto Market Ties

The Fed has withdrawn its 2023 policy statement and issued a new directive regarding the treatment of certain supervised banks. The new policy allows insured and uninsured member banks to engage in crypto-related activities.

The Fed claimed crypto as a new innovative technology offering efficiencies to banks and improved products and services for bank customers.

“By creating a pathway for responsible, innovative products and services, the Board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective,” said Vice Chair for Supervision Michelle W. Bowman.

The move would help more banks provide services including, crypto on/off ramps, crypto custody, and tokenization services.

Notably, FDIC and OCC have rescinded similar policies that limited banks’ exposure to the crypto industry. As CoinGape reported earlier, the FDIC allowed banks to manage crypto assets and offer tokenized deposits without prior regulatory approval.

Also, the OCC cleared the path for banks to hold Bitcoin, ETH, SOL, and XRP to meet the operational blockchain expenses.

US SEC Clarifies Crypto Custody Rules

The SEC’s Division of Trading and Markets released statement to clarify how broker-dealers should handle crypto custody. The guidance explains that broker-dealers must have physical possession or control of customer crypto asset securities.

Broker-dealers need to ensure secure access to crypto, be able to transfer assets, and assess risks related to distributed ledger technology. They must also have strong controls over private keys and prepare for possible disruptions like blockchain failures, cyberattacks, or bankruptcy.

These steps are designed to protect customer assets and keep markets running smoothly. They also give traditional financial institutions more clarity and confidence to enter the crypto space.

This will boost liquidity in the crypto market and advance real-world asset tokenization. However, the current market conditions amid bearish sentiment would not trigger an immediate recovery, but will gradually grow the market.

Bitcoin remains under pressure, with the price currently trading at $86,717. The 24-hour low and high are $85,316 and $90,264, respectively. Furthermore, trading volume has decreased by 17% over the last 24 hours, indicating a decline in interest among traders.