124 Interactions, 4 today
As regulators across the world become aware of the crypto craze, a growing number of organisations involved with the area are experiencing commercial challenges. Along with China’s whole crackdown, leading exchanges worldwide are facing restrictions, while authorities in the United States are pursuing other procedures and financial institutions.
The Federal Reserve Bank even proposed guidelines recently to outline the system that the central bank will use to evaluate requests to access the agency’s financial services. Caitlin Long, CEO of Avanti Bank deemed these guidelines to be partly aimed at crypto, even as the ecosystem wasn’t directly mentioned. In a series of tweets, she called this the beginning of the regulatory crackdown on crypto.
1/ THREAD ABT REGULATORY NEWS in #crypto, which I’ve been chronicling on twitter since April. Seems crackdown has begun. I dunno how it’ll turn out but:
* it won’t impact #BTC #ETH etc directly. Base layers will keep addin’ blocks
* it’ll impact intermediaries & US$ access points
— Caitlin Long 🔑 (@CaitlinLong_) July 13, 2021
The Wall Street veteran shared her opinions on the country’s regulatory climate, saying that while Bitcoin, Ethereum, and other crypto-assets may not be directly affected, authorities would prefer to go after “intermediaries” and “access points” for US funds into the industry.
“The issue isn’t Bitcoin, Ethereum, or other crypto protocols, they’re just fine. The risk comes from the banks’ operational processes.”
She went on to say that a “key event” that many people could have missed occurred on July 13, when the comment period for the Federal Reserve’s proposed payment system access guidelines ended. She feels that access to the Fed’s direct payment system is critical for numerous reasons.
She also pointed out that July 13 was the “key event” in which the comment period for the Federal Reserve’s proposed payment system access rules concluded, saying that the Fed’s recommendations were largely directed at cryptocurrencies despite not explicitly addressing the asset class.
Several bank accounts connected with cryptocurrency were closed in bulk by American institutions in 2017. Long said that it didn’t matter if the firms were frauds or legitimate, and that the risk of being debanked is extremely serious for crypto enterprises. Even the top exchange, Coinbase, echoed similar concerns in its IPO prospectus.
.“Sadly, having durable bank relationships was often THE deciding factor for whether a start-up made it… It’s impt for our industry that law-abiding companies can gain direct US$ access on our own.”
Moreover, a forced separation between banking & crypto servicing does more harm than good as it creates additional risks. Most crypto companies today obtain banking not through the Fed but indirectly through offshore eurodollar banks or via multi-layered fintech-to-fintech-to-bank arrangements.
This adds layers of fees to the payments, said the CEO, while the Fed can’t monitor latent risks to the payment system. The detailed comment from Avanti about the issues in the proposed legislation can be read here.
Avanti obtained a Wyoming bank licence in October, letting it to run the state’s crypto-friendly bank. Long was crucial in the establishment of Wyoming’s Special Purpose Depository Institutions (SPDIs), which categorise digital securities as digital assets. Avanti and Kraken are SPDIs, putting them on par with regular banks in the state.
Even Ripple’s XRP, which has been burdened by an SEC litigation for months, is thought to have the capacity to continue in the state, where it will be treated as an asset rather than a security.
It is anticipated that the new rules will not stymie this development and will allow these institutions to function in an inclusive way.