By Hannah Lang

July 22 (Reuters) - PNC Bank PNC.N is working with cryptocurrency exchange Coinbase COIN.O to offer crypto trading to the bank's customers, the companies said on Tuesday, in a sign that crypto is moving toward becoming increasingly interconnected to mainstream finance.

PNC will use Coinbase's institutional "crypto-as-a-service" platform to develop an offering that will allow PNC clients to buy, hold and sell cryptocurrencies. The Pittsburgh-based financial institution will also offer certain banking services to Coinbase.

WHY IT'S IMPORTANT

The PNC-Coinbase partnership is a stark shift for the banking sector, which crypto companies at one point had accused of being hostile to their industry.

Lawmakers earlier this year held a hearing to scrutinize U.S. banks and their regulators in response to claims they deny services to particular industries.

Republicans and Democrats agreed that banks may be improperly denying services to some clients, but disagreed on the root cause.

The banking industry has fiercely resisted accusations it denies services based on ideological reasons. It has instead argued that onerous, outdated and opaque rules make it difficult for banks to sometimes provide services, or explain why they cannot.

CONTEXT

The partnership announcement comes as U.S. President Donald Trump and his administration have embraced cryptocurrencies and enacted industry-friendly policies.

Trump signed a law on Friday to create a regulatory regime for dollar-pegged cryptocurrencies known as stablecoins, a major milestone for the digital asset sector, which has long lobbied for such a framework. Several banks including Bank of America and Citibank have said that they are exploring issuing their own stablecoins.

KEY QUOTE

"Partnering with Coinbase accelerates our ability to bring innovative, crypto financial solutions to our clients," William Demchak, PNC CEO, said in a statement. "This collaboration enables us to meet growing demand for secure and streamlined access to digital assets on PNC's trusted platform."

(Reporting by Hannah Lang in New York; Editing by Mark Porter)

((Hannah.Lang@thomsonreuters.com;))