Republican Senators Criticize Regulatory Crackdown on Banks Serving Crypto Industry
Republican senators have written a letter to US regulators criticizing the recent regulatory crackdown on banks serving the cryptocurrency industry. They claim that this regulatory crackdown will harm the entire industry and is reminiscent of the Obama Administration’s Operation Choke Point.
Operation Choke Point was an initiative in which federal regulators pressured financial institutions to cut off financial services to certain licensed, legally operating industries simply because certain regulators and policymakers disfavored those industries.
“We are especially worried that overreaching behavior by the banking regulators will inevitably bleed into other legal industries,” said the letter to Federal Reserve Chairman Jerome Powell, Acting Comptroller of the Currency Michael Hsu and Federal Deposit Insurance Corp. Chairman Marty Gruenberg. “Any industry could be potentially ‘disfavored,’ based on a given regulator’s ideological perspective.”
“The problems of the few should not drive the harm of many,” Sens. Bill Hagerty (R-Tenn.), Mike Crapo (R-Idaho), Thom Tillis (R-N.C.) and Steve Daines (R-Mont.) said, noting that revelations of Bernie Madoff’s Ponzi scheme didn’t lead to banks cutting off other asset managers. “Regulators should not be punishing an entire industry.”
The senators believe that even though there have been particular swings in volatility and unearthed some problematic vulnerabilities for the crypto industry, the problems of the few should not drive the harm of many. The senators want updated guidance and proposed rules for public comment so that lawful businesses can have access to banking services and so that banks wishing to engage in issuing or holding principal cryptoassets have clear rules to follow.
The senators have requested clarification on several issues related to the release of the recent guidance. They have asked the regulators to justify how the heightened scrutiny over crypto-related firms helps protect consumers. They have also asked if banks are allowed to provide financial services and lend to crypto firms under the guidance and if regulators will release updated guidance to clarify that.
In addition, the senators are concerned that this overreaching behavior by the banking regulators will inevitably bleed into other legal industries. They have requested clarification on whether there is internal discussion among or a pending plan by any of the banking regulators to release similar guidance for other disfavored industries.
The senators have also asked the regulators to explain how they are ensuring that national banks provide the crypto industry with fair access to financial services, as required under 12 U.S. Code § 1. They have requested records interpreting or explaining compliance with this requirement.
Furthermore, the senators have asked the regulators to analyze internally whether the recent crypto-related guidance conflicts with policies released in 2019 related to the Operation Choke Point settlement. The senators want clarification on how banks who do want to engage in issuing or holding as principal crypto-assets can do so consistent with the regulators’ supervisory and regulatory requirements. Lastly, they want clarification on how banks who want to engage with companies in the crypto economy can provide banking services—such as simple operational accounts—to that industry without fearing retribution from their prudential banking regulator.
In conclusion, the senators believe that the banking regulators should not be punishing an entire industry but should be working to provide updated guidance and proposed rules for public comment so that lawful businesses can have access to banking services. The senators are requesting clarification on several issues related to the recent guidance and have asked regulators to ensure fair access to financial services for the crypto industry. They asked for a response by March 24.
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