Crypto and Community Banks: Weighing the Opportunity, Cost and Risk By Kurt Leeper, Partner Otteson Shapiro, ICBC Silver Associate Member “How do you make a small fortune by investing in cryptocurrency? Start by investing a large fortune,” or so goes the quip about investing in crypto and any number of other speculative assets. One-liners aside, it is becoming increasingly difficult to deny that cryptocurrency, or crypto for short, particularly the blockchain technology on which it is based, is here to stay. Although AI has taken much of the public’s attention previously lavished on crypto, the question of whether and how to engage with crypto remains meaningful for community banks and will only become more so in the future. There is no shortage of media opinions on crypto and the ways community banks should or should not engage with it. Accordingly, this article does not provide guidance on the latest crypto products or ways banks can stay ahead of the curve as they engage with those products. Rather, what follows is a framework community bank executives can use to decide whether to engage with crypto in the first place. This framework consists of four simple questions: • Who are the bank’s potential crypto customers? • Are they ideal customers? • Can the bank provide the products and services these customers are seeking? • Are these customers worth the cost and risk that comes with serving them? Before diving into these questions, a brief overview of the current crypto landscape and the reason these questions are important is helpful. The current administration is, as has been well documented, exceedingly crypto-friendly. The GENIUS Act, signed into law in 2025, helped usher crypto into the regulatory mainstream. Its successor, the CLARITY Act, remains stalled in the Senate, though it seems likely some aspects of the bill will become law at some point in the future. So, what does this mean? Crypto isn’t going anywhere anytime soon, and while community banks need not dive into the world of crypto headfirst, crypto does pose both an opportunity and a threat to banks. Therefore, it is worth considering how, if at all, your bank should engage with it. Accordingly, the first question to ask is: Who are the potential crypto customers your bank is looking to serve? Ask your relationship managers and other customer-facing employees: Who, if anyone, has asked for crypto-related services? Are they long-time customers with significant deposits and meaningful lending needs, or are they newer, less established customers with limited relationships? Based on the answer to the first question, ask next: Are these potential customers ideal customers for your bank? In answering this question, it is important to consider your bank’s risk model and appetite. Assuming you have identified a group of potential customers with crypto-related needs and who are desirable customers for the bank, a critical gating question must be answered: Can the bank reasonably provide the products and services those potential customers are seeking? This, in turn, will depend on what those products and services are. For example, creating a stablecoin for international payments will look very different from offering deposit accounts to crypto-adjacent companies. In any case, serving crypto customers will, for most banks, require a meaningful investment in infrastructure, compliance and operations. Finally, if you have affirmatively answered all these questions, you must ask yourself: In light of the potential upside, are these customers worth the anticipated costs in time, money and risk? To answer this question, bank leaders must consider the short- and long-term viability of customer relationships, the aforementioned costs of serving those customers and the environment in which the bank will provide crypto products and services. While, as previously noted, the current administration has opened its arms to crypto, excesses are inevitable, and there is no guarantee that a future administration will not take a more skeptical approach toward crypto. This potential shift could result in higher costs and risks or produce other unanticipated consequences. While crypto may be here to stay, community bankers can ask the previously discussed four questions to determine who their banks’ potential crypto customers are, whether they will be a good fit, the ability of the bank to serve them and, finally, whether serving them is worth the cost and risk. Doing so can help ensure that any investment in serving crypto customers does not turn a large fortune into a small one. INDEPENDENT REPORT | 23
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