Well, well, well. Look who’s finally decided to join the 21st century. The FDIC — that bastion of bureaucratic brilliance — has just issued new guidance saying banks can now engage in “permissible crypto-related activities” without begging for permission first. Acting Chairman Travis Hill declares they’re “turning the page on the flawed approach of the past three years.”
The flawed approach of the past three years
Let me tell you about those three years.
I should know — I lived through them as the FDIC’s first (and apparently last) Chief Innovation Officer, a role I occupied for exactly one year before throwing in the towel and writing what can only be described as a regulatory resignation letter that made headlines. My Bloomberg op-ed, titled “Why I Quit as FDIC Innovation Chief: Technophobia,” wasn’t just a farewell — it was a eulogy for American financial leadership. Oh and yes I know they announced this in March, but here in June we’re still not seeing a lot of action so I don’t feel late, especially in regulatory terms.
The cave paintings of financial regulation
Picture this: you’re tasked with explaining cryptocurrency to an agency where less than one-half of staff had a basic understanding of the technologies they regulate. Even senior officials — the people making the rules — are baffled by concepts like fintech, the dark web, and even financial apps. It’s like being asked to teach quantum physics to people who think electricity is witchcraft.
The resistance wasn’t just to crypto — it was to modernity itself. I received pushback from staff in response to basic modernization efforts such as ending the use of fax machines and physical mail. FAX MACHINES. In 2021. While I’m trying to explain blockchain technology, these people are literally still sending documents via methods invented when disco was popular. My often-repeated dad joke is that most of these people can’t even change the ring tones on their phones.
The great crypto standoff
For three years, the FDIC treated cryptocurrency like that weird uncle at Thanksgiving — acknowledged its existence but kept it at arm’s length, occasionally throwing suspicious glances and making everyone uncomfortable. Banks wanting to dip their toes in digital assets had to go through a bureaucratic obstacle course that would make Kafka weep — and to no end in process.
The 2022 guidance essentially required banks to ask “Mother, may I?” before doing anything crypto-related. It was regulatory helicopter parenting at its finest — the kind of risk-averse, innovation-crushing approach that makes China’s central bank digital currency look like a stroke of genius by comparison.
And now? Now they’ve suddenly discovered that maybe, just maybe, treating the fastest-growing sector of finance like radioactive waste wasn’t the smartest strategy.
The technophobic bureaucracy
In my Bloomberg piece, I called the federal bureaucracy “both hesitant and hostile to technological change” and warned that “America’s global financial leadership is in jeopardy.” That was in February 2022. Three years later, the FDIC is finally admitting I might have had a point.
The problem wasn’t just ignorance — it was willful ignorance combined with institutional inertia. Something like 30% of different departments at FDIC have a majority of staff who are retirement-eligible, meaning their planning horizon extends about as far as their next pension check based on their over $300,000 a year salary. You can’t innovate for the future when half your workforce is mentally already on a golf course in Florida.
The caveman analogy
Explaining crypto to financial regulators in 2021–2022 was exactly like trying to explain the automobile to cavemen. Except worse, because at least cavemen were curious about new hunting techniques. These regulators looked at innovation the way cavemen might look at fire — simultaneously terrified and convinced it would burn down everything they’d spent decades treading water around.
“But what if people use Bitcoin for bad things?” they’d ask, apparently unaware that people have been using cash for bad things since cash was invented. “But what about consumer protection?” they’d worry, while simultaneously allowing payday lenders to operate with predatory rates that would make a medieval usurer blush. The US Treasury Department estimates that at least $300 billion is laundered annually in the US.
The real cost of institutional cowardice
While the FDIC was busy playing whack-a-mole with crypto innovation, Singapore was building a comprehensive digital asset framework. While our regulators were clutching their pearls over DeFi, the UK was positioning itself as a global crypto hub. We weren’t just falling behind — we were actively sabotaging our own competitive position. And let’s not even get into the regulatory innovations in the UAE, the global home of crypto currently.
The “flawed approach” wasn’t just about crypto policy — it was about a fundamental inability to adapt to technological change. We had an agency filled with lawyers over 50 trying to regulate technologies they couldn’t even pronounce, let alone understand.
Welcome to the party, it’s only half over
So here we are in 2025, with the FDIC finally admitting that maybe banks should be allowed to participate in the digital economy without filing Form 27-B in triplicate and waiting six months for approval. Better late than never, I suppose, though “late” doesn’t quite capture the magnitude of this timing failure.
The new guidance is a step in the right direction, but let’s not break out the champagne just yet. This is like finally getting indoor plumbing and acting like you invented the flush toilet. The rest of the world has been building crypto infrastructure while we’ve been debating whether blockchain is safe enough for our delicate financial system.
The Trump administration’s uphill battle
To be fair, the Trump administration is trying to course-correct this regulatory disaster. The Senate just passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) in a 68–30 vote, creating the first federal framework for stablecoins. Trump himself has said he wants stablecoin legislation on his desk before Congress breaks for its August recess, and there’s genuine bipartisan momentum building.
But here’s the kicker: this was supposed to be “the easiest crypto bill to pass,” yet it took months to reach the Senate floor, failed once, and passed only after fierce negotiations. As Senator Cynthia Lummis admitted, “We thought it would be easiest to start with stablecoins. It has been extremely difficult. I had no idea how hard” such efforts would be.
The GENIUS Act is progress, but it’s also a perfect example of how broken the system remains. We’re celebrating the passage of basic regulatory clarity for stablecoins like it’s the moon landing, when countries like Singapore established comprehensive crypto frameworks years ago. It’s regulatory Stockholm syndrome — we’ve been trapped in bureaucratic paralysis for so long that any movement feels like victory.
And even this modest progress comes with controversy. Critics like Elizabeth Warren opposed the bill partly because of Trump’s own crypto ventures, including his stablecoin USD1, arguing it creates conflicts of interest. The spectacle of senators debating whether the President should be allowed to profit from the very industry he’s trying to regulate perfectly captures the absurdity of our situation.
The bottom line
Three years ago, I warned that American financial leadership was at risk because our regulators were more interested in protecting their bureaucratic fiefdoms than protecting America’s competitive edge. The recent FDIC announcement and the GENIUS Act prove my point — we’re finally doing what we should have done in 2021 (or earlier), except now we’re playing catch-up in a race where everyone else got a head start. And Congress is moving at the pace we should expect (i.e. very slowly).
The FDIC’s “green light” for crypto isn’t innovation — it’s admission of failure. It’s regulatory agencies finally acknowledging that maybe, just maybe, treating the future of finance like a contagious disease wasn’t the brilliant strategy they thought it was.
But hey, at least they’ve stopped using fax machines. So has anything really changed that much?
tl;dr: no.
Originally published on Sultan Meghji’s Substack (June 24, 2025). Sultan Meghji was the inaugural Chief Innovation Officer of the U.S. FDIC, founder of Virtova, and is currently Co-Founder and CEO of Frontier Foundry.