As financial institutions delve deeper into the world of cryptocurrency and digital assets, they face a myriad of challenges that simultaneously present opportunities. The American Banker’s On-Chain Finance Report, which surveyed 142 employees from banks, credit unions, and payment companies in late 2025, sheds light on critical challenges that these institutions encounter when integrating digital currencies into their services. This report, rooted in empirical data, outlines five key challenges they’re grappling with, including return on investment, crypto infrastructure planning, KYC (Know Your Customer) and compliance measures, anti-money laundering (AML) defenses, and concerns over crypto fraud.
### Return on Investment (ROI)
One of the foremost challenges for financial institutions revolves around the expected return on investment from digital asset programs. Approximately half of the surveyed leaders anticipate seeing returns within 18 months, following the adoption of cryptocurrencies. Some were optimistic, with a minority (three percent) hoping for meaningful revenue within six months. However, a significant portion (40%) of respondents forecasted return beyond the 18-month mark, whilst 15% remained unsure about their organizations’ revenue-generating capabilities in this domain.
The extended timeframe to realize returns emphasizes a cautious optimism among financial leaders. As the market for cryptocurrencies evolves, institutions are under pressure to balance the need for innovation with the realities of investment timelines and profitability. This duality presents a challenge: how to effectively integrate digital assets without diverting too much focus from their traditional revenue-generating activities.
### Crypto Infrastructure Planning
Infrastructure development for cryptocurrency programs is another area of concern for banks and credit unions. The findings indicate that these institutions are primarily turning to outside partners for expertise, rather than relying solely on in-house resources. Only six percent reported developing their infrastructure entirely in-house, while an equal number considered acquiring firms with the necessary technology.
A majority of organizations (94%) are collaborating with external experts, with options ranging from equal partnerships with consultants to leaning heavily on third-party organizations. This reliance on external partners introduces its own challenge—managing these relationships effectively while ensuring that the institution’s goals and compliance standards remain front and center.
### KYC Protocols in Crypto
The integration of KYC frameworks into cryptocurrency programs poses another challenge. Given the regulatory scrutiny surrounding the advent of digital currencies, banks and credit unions must adapt their existing protocols to meet compliance requirements. Notably, 50% of the respondents said their organizations were modifying existing KYC frameworks for stablecoins, while a similar percentage reported forming specialized teams to tackle compliance.
Several organizations are also leaning on industry partners for guidance on crypto-specific KYC protocols. However, reliance on external partners can introduce variability in standards and practices, complicating adherence to regulatory expectations. This necessitates a careful balancing act between leveraging external expertise and ensuring rigorous internal compliance.
### Implementing Anti-Money Laundering Defenses
AML compliance is a critical area for financial institutions venturing into the cryptocurrency landscape. Given the heightened risk of fraud and illicit activity in the crypto market, 59% of respondents stated they would adapt existing AML frameworks for their digital asset programs. A segment of respondents (41%) planned to create specialized compliance teams in-house, while others looked to industry partners for help.
This adaptive strategy indicates a common belief that existing frameworks can be modified rather than entirely reinvented for crypto environments. However, reliance on traditional structures may leave gaps in addressing the unique challenges posed by the fast-evolving cryptocurrency market. Thus, while adaptation is essential, continuously evolving these frameworks is equally crucial to keep pace with emerging risks.
### Weighing the Risks of Crypto Fraud
The risk of fraud stands out as the most prominent concern for financial institutions involved with cryptocurrencies, with around 70% of respondents citing fraudulent transactions as their top worry. Other significant risks include the volatility of the crypto market (63%), cyberattacks (56%), and the level of required tech investments (53%). Interestingly, concerns about running afoul of regulators were noted by a smaller segment (47%).
The prominence of fraud as a concern indicates that banks and credit unions recognize the importance of establishing robust safeguards against malfeasance in an increasingly volatile landscape. This awareness contributes to the cautious approach many institutions are adopting as they develop their digital asset strategies.
### Conclusion
This comprehensive report from American Banker reveals critical insights into the challenges that banks and credit unions face while exploring cryptocurrency and digital assets. The emphasis on a cautious yet optimistic approach is apparent throughout the findings, where leaders are keen to innovate but remain cognizant of the associated risks and regulatory landscapes.
As these institutions continue to navigate their digital asset strategies, the integration of external expertise, adaptive compliance frameworks, and a focus on fraud prevention will be paramount to success. The road ahead may be fraught with challenges, but the potential rewards beckon financial institutions to engage carefully and strategically with the world of cryptocurrencies.
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