The U.S. government's regulatory strategy towards crypto firms
Terrill Dicki Feb 12, 2023 06:36
US officials reportedly discourage banks from serving the bitcoin business.
According to Nic Carter, co-founder of venture firm Castle Island and crypto intelligence firm Coin Metrics, the alleged strategy involves isolating the traditional financial system from the cryptocurrency market by relying on "multiple agencies to discourage banks from dealing with crypto firms." The goal of this strategy is to lead crypto businesses to become "completely unbanked." This strategy is aimed at isolating the traditional financial system from the cryptocurrency market.
"Regulators intimidate and blackmail bank leadership behind the scenes, and then they produce public "advice" underlining that banks are still free to hold cryptocurrencies or serve cryptocurrency customers. In point of fact, they are not at all free to act in this manner in any way.
A joint statement was issued on January 3 by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency warning about the risks of banks engaging in crypto and encouraging them to refrain from doing so due to "safety and soundness" concerns. This event is among other recent regulatory developments. In the same month, Binance made the announcement that it will no longer execute any U.S. currency transactions that were less than $100,000 owing to a new policy implemented by Signature Bank.
Signature Bank made the announcement in December 2022 that it intended to restrict the number of cryptocurrency services it offered, refund clients' monies, and cancel their accounts. Due to liquidity concerns caused by the bear market and the collapse of FTX, the bank is said to have borrowed almost $10 billion from the United States Federal Home Loan Bank System in the last quarter of 2022.
"Banks are reconsidering whether or not it is worthwhile to continue providing these services in light of the potential risks."
According to comments made by the CEO of Coinbase, Brian Armstrong, on Twitter, another focus for United States authorities seems to be the prohibition of crypto staking services for retail consumers. Staking is a method that enables investors in cryptocurrencies to place their digital assets under the control of a smart contract in return for incentives and passive income.
The methods used by the authorities in the United States are not novel. Operation Choke Point was a regulatory program that was implemented by the federal government in 2013 and targeted a range of "high-risk" sectors in addition to increasing the level of oversight of financial institutions that provide services to these types of companies.
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