Banks Embrace Digital Assets Amid Regulatory Challenges

According to Cointelegraph, banks are increasingly recognizing the potential of digital technology and assets, but many may not fully understand the level of commitment required to succeed in this sector. Erica Khalili, co-founder and chief legal and risk officer of Lead Bank, highlighted these challenges during a panel discussion at Ripple Swell in Miami, Florida. Khalili emphasized that banking in the crypto sector demands significant investment and the ability to maintain a strong relationship with regulators. She noted that the influx of new banks into the sector has made regulatory clarity and interagency collaboration among banking regulators crucial. Khalili stated, 'For a long time, there was an intent to live in the gray area and that was fine and it worked and we were all kind of OK with it.' However, many banks now strive to meet regulatory expectations from the outset, which presents its own set of challenges. Lead Bank has adopted a three-pronged approach to managing regulatory relationships. The first component is education, aimed at countering negative perceptions of crypto with real-life use cases that demonstrate the influence of digital assets on capital markets. The second prong involves showcasing the attainments of digital technology, which provides both bankers and regulators with highly efficient monitoring capabilities. Khalili explained, 'Regulators get that direct oversight where we're not looking to like spurn regulation, we're embracing it.' The final component is patience, as Khalili acknowledged that the regulatory landscape is constantly evolving, requiring banks to keep pace and act as thought partners. Khalili also pointed out that banks may be tempted to explore digital asset banking out of curiosity or for cost reduction purposes. However, the significant investment required makes a tentative approach impractical. Success in the sector necessitates a deep understanding of the technology, as well as investment in products, technology, and personnel. Khalili and her three co-founders acquired Lead Bank, headquartered in Kansas City, Missouri, in August 2022, with the aim of providing banking services to the crypto sector.