Tuesday, 21 March 2023

Crypto News

Banks under pressure from U.S. authorities to cut ties with crypto firms

Banks under pressure from U.S. authorities to cut ties with crypto firms

United States authorities appear to be resurrecting past techniques to crackdown on crypto firms and banks offering services to the industry, several sources told Cointelegraph.

The alleged strategy consists of isolating the traditional financial system from the crypto market by spanning “multiple agencies to discourage banks from dealing with crypto firms,” aiming to lead crypto businesses to become “completely unbanked,” according to Nic Carter — co-founder of venture firm Castle Island and crypto intelligence firm Coin Metrics.

The claims rely on conversations he had with bank executives, including crypto native and traditional banks, Carter told Cointelegraph. “They tell me they are facing immense pressure from the Fed [Federal Reserve] and FDIC [Federal Deposit Insurance Corporation]. Founders are telling me that they can’t get bank accounts anywhere for new startups.” According to Carter:

“Regulators threaten and bully bank leadership behind the scenes, then publish public “guidance” stressing that banks are still free to custody crypto or service crypto clients. In reality, they’re not free to do this, by any means.”

Other recent regulatory events include a joint statement released on Jan. 3 by the Fed, the FDIC and the Office of the Comptroller of the Currency (OCC) warning about the risks of banks engaging in crypto, and encouraging them to refrain from doing so due to “safety and soundness” concerns. Also last month, Binance announced that they would only process fiat transactions over $100,000 due to a new Signature Bank policy. 

In December 2022, Signature Bank announced its plans to reduce crypto services, return funds back to customers and close their accounts. The bank reportedly borrowed nearly $10 billion from the U.S. Federal Home Loan Banks System in the last quarter of 2022 due to liquidity issues related to the bear market and crypto exchange FTX collapse.

“There is particular concern with crypto exchanges and related intermediaries that operate outside of the United States because their choice of jurisdiction usually focuses on maximizing profit, usually to the detriment of the customer,” Aaron Kaplan, CEO of blockchain fintech Prometheum and counsel at law firm Gusrae Kaplan Nusbaum, told Cointelegraph. He explained:

“Banks are reevaluating whether continuing to provide these services is worth the risk.”

Another priority for U.S. regulators would be to ban crypto staking services for retail customers, Coinbase CEO Brian…

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