As the backbone of local economies across the United States, the future of community banks lies in an unlikely ally: cryptocurrency policy.

In rural and deprived areas, local financial institutions face enormous pressure to maintain their competitiveness as the technological and financial infrastructure around them rapidly develops. As blockchain technology becomes more widespread, community banks are given an opportunity to revitalize themselves. By laying down blockchain rails and adopting “digital cash” stablecoins, they can improve how people participate in the financial system while driving domestic growth that avoids bank monopolies.

In times of deep political division, cryptocurrency policy is no longer a point of contention but rather a bridge across the aisle – and community banks are the common denominator. Both sides of the aisle are brought together with a shared vision of 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 instruments for everyone, regardless of their economic status – while allowing for political alignment and bringing blockchain and cryptocurrencies to the forefront.

Community banks powered by blockchain technology

Within their economies, community banks provide small businesses and individuals with access to important and personalized services that fit their needs—needs that larger financial institutions often ignore to avoid costs and risks. Despite the valuable multiplier effect they provide for people and our economy, these institutions face increasing pressure from big banks and advancing technological advances. Without support from political leaders, community banks risk losing their relevance.

While these organizations continue to struggle, there is a lifeline available through blockchain technology, offering tools that enhance efficiency, scalability and accessibility – essential to their survival in the digital age.

Regulations put in place during the financial crisis made the cost of operating a bank of any size insurmountable for small institutions. But blockchain technology, in general, and digital cash, in particular, have the potential to make the basic ledgers of banking more efficient — and more affordable for community bank work. This will help community bankers focus their resources on local community relationships, understanding customers and businesses in their area, and determining who can be trusted with small business loans that will develop local economies.

The recent election cycle in the United States has shown that cryptocurrencies have become a major priority for policymakers. Regardless of their party affiliation, lawmakers are well aware of blockchain's potential to empower community banks. This shows how important it is for these small financial institutions to embrace blockchain technology. Not only will it remain competitive and independent, but it will also reduce its dependence on larger financial institutions, while at the same time strengthening the broader American financial system.

Orienting community banks towards digital assets

Without proactive support for the adoption of cryptocurrencies in community banks, there is a growing risk of financial centralization, with larger banks monopolizing the benefits of blockchain – further marginalizing smaller institutions. By implementing blockchain solutions, community banks can maintain local financial independence, protect them from consolidating economic power and ensure more equitable access to innovation.

Currently, community banks are largely excluded from the remittance market, leaving small-town residents with more expensive money transfer services as their only option. According to the World Bank, the average cost of sending remittances globally is 6.4%That is more than double the sustainable development goal of 3%. Through regulated stablecoins and blockchain, community banks can offer efficient and affordable alternatives, reducing user costs while attracting new customers – a win for financial inclusion and community banking.

This is not without challenges. When bringing digital assets to community banks, regulatory uncertainty surrounding the classification of digital assets such as cryptocurrencies has led to community banks being hesitant to adopt digital currencies and tools. For community banks to join, it is essential that they have clear regulations – along with collaboration – from industry leaders and policymakers. This will help foster a secure foundation for the adoption of blockchain technology at both the bank and consumer levels.

Ensuring community banks can embrace blockchain technology is not just about protecting local economies, it is also about creating a framework for a more inclusive and resilient financial system. To allow community banks to unleash the full potential of blockchain technology, these regulatory hurdles must be addressed and replaced with practical and achievable solutions.

The future of community banking

While some argue that even with the right solutions and tools, community banks still lack the resources to adopt both blockchain and cryptocurrencies. However, there has been a movement from state banking regulators to create new charters that would make it easier for communities to access these technologies.

For example, the Nebraska Financial Innovation Act (NFIA) of 2021 demonstrated the potential to bridge the gap between digital assets and traditional banking. By allowing digital asset depository institutions (DADIs) to form — whether independent charters or FDIC-insured Nebraska banks — the legislation is slowly showing its support for blockchain technology to integrate into legacy financial institutions like community banks.

As interest in cryptocurrencies grows, so does their role in ensuring community banks grow with technology. By providing community banks with these decentralized tools, we will see not only a technological shift to the right, but an economic and political shift capable of uniting Americans through financial inclusion and financial empowerment. Although it is a partisan issue of the past, we are ready to turn a new page for cryptocurrencies, starting at the local level.