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As the backbone of local economies across the United States, community banks’ futures lie with an unexpected ally: crypto policy.
In rural and underserved areas, local financial institutions are facing enormous pressure to remain competitive as the technological and financial infrastructure quickly evolves around it. With blockchain technology becoming more mainstream, community banks are being presented with an opportunity to revitalize themselves. By laying blockchain rails and adopting “digital cash” stablecoins, they can improve how people participate in the financial system while driving local growth that sidesteps bank monopolies.
In times of deep political division, crypto policy is no longer a point of contention but a bridge across the aisle—and community banks are the common denominator. Both sides of the aisle are brought together with a shared vision for strengthening local economies by empowering community banks to drive innovations within the financial system. By providing this runway, community banks will be at the forefront of modernizing financial tools for everyone, regardless of their economic status—while allowing for political alignment and bringing blockchain and cryptocurrency to the forefront.
Community banks powered by blockchain tech
Within their economies, community banks provide small businesses and individuals with access to critical, personalized services custom-fit to their needs—needs that larger financial institutions often ignore to sidestep costs and risk. Despite the valuable ripple effect they provide to people and our economy, these institutions are facing growing pressures from big banks and developing technology advancements. Without support from political leaders, community banks risk irrelevance.
While these institutions continue to struggle, there is a lifeline available through blockchain technology, offering tools that enhance efficiency, scalability, and accessibility—key to their survival in the digital age.
Regulations put in place during the financial crisis have made the cost of operating a bank of any size insurmountable for smaller institutions. But blockchain, in general, and digital cash, in particular, have the potential to make the underlying ledger plumbing of banking more efficient—and more affordable for a community bank to operate. This will help community bankers focus their resources on local community relationships, understanding their neighborhood customers and businesses, and determining who can be trusted with small business loans that will develop local economies.
The recent United States election cycle showed that crypto has become a major priority for policymakers. No matter their party affiliation, lawmakers are well aware of blockchain’s ability to empower community banks. This demonstrates how essential it is for these smaller financial institutions to embrace blockchain technology. Not only will they remain competitive and independent, but it will also reduce their reliance on larger financial institutions while simultaneously strengthening the broader US financial system.
Guiding community banks to digital assets
Without proactive support for crypto adoption in community banks, there is a growing risk of financial centralization, with big banks monopolizing blockchain’s benefits—leaving smaller institutions further marginalized. By implementing blockchain solutions, community banks can maintain local financial autonomy, protecting them against the consolidation of economic power and ensuring more equitable access to innovation.
Currently, community banks are largely excluded from the remittance market, leaving small-town residents with higher-cost money transfer services as their only option. According to the World Bank, the average cost of sending remittances globally is 6.4%, more than double the Sustainable Development Goal target of 3%. With regulated stablecoins and blockchain rails, community banks could offer affordable, efficient alternatives, reducing the user’s costs while attracting new customers—a win for financial inclusion and community banking.
This is not without its challenges. When bringing digital assets to community banks, regulatory uncertainty surrounding the classification of digital assets like crypto has created hesitation from community banks to adopt digital currency and tools. For community banks to be on board, it is essential to have clear regulations—along with collaboration—from both industry leaders and policymakers. This will help foster a secure foundation for blockchain adoption at the bank and consumer level.
Ensuring community banks can embrace blockchain is not just about protecting local economies—it’s about creating a framework for a more inclusive and resilient financial system. To allow community banks to unlock the full potential of blockchain technology, these regulatory hurdles must be addressed and replaced with practical and attainable solutions.
The future of community banking
While some argue that even with the right solutions and tools, community banks still lack the resources needed to adopt both blockchain and crypto. However, there has been movement from state banking regulators to create novel charters that will make it easier for communities to access these technologies.
For example, the Nebraska Financial Innovation Act (NFIA) of 2021 demonstrated the potential for bridging digital assets and traditional banking. By allowing Digital Asset Depository Institutions (DADIs) to form—whether they be standalone charters or from FDIC-insured Nebraska banks—legislation is slowly showing its support for blockchain technology to integrate into legacy financial institutions like community banks.
As interest in crypto grows, so too does its role in ensuring community banks grow with the technology. By powering up community banks with these decentralized tools, not only would we witness a technological shift to the right, but an economic and political one that could unify Americans through financial inclusion and empowerment. While a partisan issue of the past, we’re ready to turn over a new leaf for crypto, starting at the local level.
