Banking News Roundup – 2025: Week 13

The CFPB lives! To deregulate! CDFIs catch a break. Paper checks are out in DC. Regulators get busy reshaping the compliance landscape. Stablecoins are launching. SWIFT draws a line in the sand.

Washington DC Tidal Basin during the National Cherry Blossom Festival. Credit: Dora Dalton.

Washington D.C.

The CFPB lives to fight another day. A U.S. district judge granted a preliminary injunction that reinstates terminated workers, reinstates its cancelled contracts, and preserves the agency’s data.

Community Development Financial Institutions (CDFIs) also got a reprieve. American Banker reports that the Treasury Department determined that the 11 CDFI Fund programs it administers are required by law.

President Trump signed an executive order calling for the federal government to stop using paper checks by September 30, with minor exceptions, and is requiring citizens to use electronic payment forms as well. The U.S Government spent $657 million in fiscal year 2024 to collect and process paper check payments, and the move is expected to reduce processing costs and losses from fraud.

Regulation

The latest chapter in the effort to modernize rules around banks’ Community Reinvestment Act (CRA) obligations is coming to a close. The Federal Reserve, Federal Deposit Insurance Corp. (FDIC) and Office of the Comptroller of the Currency (OCC) are moving to rescind the 2023 CRA rule and revert to the final rule issued in 1995. The Biden Administration similarly reversed former Comptroller Joseph Otting’s 2020 modernization effort in 2021. The perennially controversial issue of updating the rule, which currently focuses on geographic assessment areas based on branch locations, will almost certainly continue. However, the regulatory community is not likely to take it up until permanent heads are appointed at the OCC and FDIC.

Acting OCC head Rodney Hood announced a restructuring of the agency’s financial inclusion efforts, naming Acting Chief of Staff Andrew Moss as the new head of the agency’s Office of External Relations and Strategic Partnerships. Moss currently runs the OCC’s Project REACh, a Trump-era effort to deconstruct barriers to financial inclusion. The move seems to be an effort to align OCC resources around "four key workstreams" that Hood laid out, specifying affordable homeownership, small businesses, financial technology and "geographic-specific efforts” as the focus of the restructured unit.

Compliance officers at the nations’ largest banks might want to set their alarm clocks a little earlier in the coming weeks. The New York Office of the OCC called all workers back to its Times Square location, but it doesn’t have enough desks. Bloomberg reports that workstations “will be available on a daily first-come, first-served basis.” The New York office houses “large bank” regulators, including examiners for JPMorgan, Morgan Stanley, and Citigroup, and others.

Returning CFPB staff and vendors may find their marching orders somewhat changed when they reenter the office. The CFPB’s eight year old Payday Lending Rule was set to take effect today, but the agency announced that it will not prioritize enforcement or supervision. The rule is the subject of pending legal challenges. Additionally, the CFPB stated in court filings that it plans to revoke an interpretive rule classifying Buy Now Pay Later lenders as credit card providers. Lastly, in an unprecedented move, the agency asked a court to vacate a $105,000 settlement against Townstone Financial due to CFPB “misconduct.”

The FDIC rescinded 2022 guidance that required banks to notify the agency prior to engaging in cryptocurrency-related activities. It specified that no prior approval is required for a variety of permissible activities including custody services, holding stablecoin reserves, issuing digital assets, participating in blockchain-based payment networks, and other services around market making, clearing, and lending. The agency also joined the OCC in halting supervisory activities related to reputation risk.

Digital Assets (aka Cryptocurrency)

Custodia Bank and Vantage Bank announced the first ever tokenization of a bank deposit on a permissionless blockchain. “Permissionless” is the operative word in this announcement. Prior bank-led initiatives have largely focused on private, permissioned blockchains—networks where transactions are only allowed between pre-approved participants. Think of a tokenized deposit as a digital version of an official check. A private blockchain is like handing that check to someone only if you’re both standing inside the same bank branch—not entirely convenient. The Custodia / Vantage token, Avit, is tradeable on the Ethereum mainnet. That means the deposit can now travel, uncashed, to a much wider audience.

A new venture came out of stealth mode last week with a mission of solving the stablecoin “off-ramp” problem. While initiatives like Avit make it easier to exchange tokenized dollars, users ultimately still need to convert those dollars to cash—or another sovereign currency—at some point. A group of former Block employees launched Stable Sea to facilitate the off-ramping process, and to create a unified treasury platform that will automate payment initiation and reconciliation processes for corporate treasurers.

Trump family-backed World Liberty Financial announced a US dollar-pegged stablecoin which will be minted on both the Ethereum blockchain and the Binance Smart Chain. BitGo will custody the collateral backing the coin, which will consist of US Treasuries, bank deposits, and other cash equivalents.

Wyoming Governor Mark Gordon announced that the Cowboy State will launch its own stablecoin as early as July, collateralized by US Treasuries, cash, and repurchase agreements. The WYST token has not yet selected a blockchain for the offering. GOP Majority Whip Rep. Tom Emmer declared he is “vehemently” opposed to the project, comparing it to a Central Bank Digital Currency (CBDC) which would be prohibited at the federal level.

The SEC officially dropped its cases against Kraken, ConsenSys, and Cumberland on Thursday. All three were accused of operating unregistered securities businesses for various types of activities. Separately, Galaxy Digital agreed to a $200 million settlement with the New York State District Attorney for alleged “misrepresentations and omissions” in its public statements about the LUNA token. LUNA was an algorithmic stablecoin¹ that famously collapsed in 2022. Galaxy Digital CEO Mike Novogratz infamously participated in the buzz around LUNA’s rise, including having an homage to the token tattooed on his bicep. The settlement requires Galaxy to adopt policies and procedures around public statements.

The U.S. Treasury Department Office of Foreign Asset Control (OFAC) lifted sanctions against Tornado Cash. In November 2024, the U.S. Court of Appeals for the 5th Circuit ruled that OFAC overstepped in issuing the sanctions, because the service itself did not constitute the property of a foreign national or an entity. Criminal charges are still pending against co-founder Roman Storm and another Tornado Cash developer.

Payments

American Banker reports that SWIFT is standing firm in its November 22 deadline for adoption of the ISO 20022 standard. Only 30% of banks were compliant with the new standard as of December 2024. SWIFT is preparing a contingency plan for converting legacy message formats to ISO 20022 if necessary following the deadline.

Transactions

• American Banker reports that Cadance Bank secured regulatory approvals on its acquisition of FCB Financial in just 61 days. While the speedy approval could be the result of many different factors, the industry took the quick turnaround as a hopeful sign that barriers to closing deals could be receding.

• Community Bancorp Inc. announced a deal to acquire Farmers National Bancshares, the parent company of Prairie Bank. The two Kansas banks will combine to form a $2.3 billion asset institution. Terms were not disclosed.

• Kansas-based Dream First Bank announced it will acquire Oklahoma-based BancCentral. The combined entity will hold $957 million in assets. Terms were not disclosed.

• BankFirst Capital Corporation agreed to acquire The Magnolia State Corporation. The two Mississippi firms will combine to hold $3.2 billion in assets. Terms were not disclosed.

• Massachusetts mutual banks MountainOne Financial, MHC and Mechanics Bancorp, MHC agreed to combine. The entity will hold $1.8 billion in assets and each entity will continue to operate independently following the transaction. Terms were not disclosed.

1. Note: proposed stablecoin legislation – the GENIUS Act and STABLE Act – refers to algorithmic stablecoins as “endogenously collateralized stablecoins” or ECSs.