Fed’s Crypto Guidance withdrawal Faces Criticism
The Federal reserve recently withdrew some guidance on crypto risks for banks. But Senator Cynthia Lummis isn’t buying it.she thinks it’s just for show.
Lummis, a crypto advocate, argues the Fed’s move is hollow. On April 25, she tweeted her concerns. She believes the Fed is still blocking crypto-pleasant banks. Thes banks need special accounts to join the Fed’s payment system. Yet, they face delays. Custodia Bank, for instance, is suing the Fed over this issue.
Reputation risk is another sticking point.The Fed uses this to monitor banks. It affects industries like oil, marijuana, and crypto. This makes it tough for legal businesses to find banking partners.The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have stopped using reputation risk. The Fed, though, hasn’t followed suit. This hinders crypto firms. They struggle to find banking services. Many are forced to look abroad.
One key policy remains. The policy Statement on Section 9(13) is still in place. It labels bitcoin and other cryptos as “unsafe and unsound.” This stance complicates crypto banking. The Fed hasn’t changed its stance on crypto. It still views the digital assets as risky. This stance blocks crypto firms from accessing customary banking. Lummis claims the Fed hasn’t truly shifted its position. She points to “Chokepoint 2.0.” It’s a term for anti-crypto actions by U.S. regulators under Biden. Crypto firms faced banking hurdles. Many moved offshore.
Senator Lummis calls out the fed for not truly changing its stance on crypto. Despite withdrawing some guidance, the Fed still blocks crypto-friendly banks from accessing its payment system. This has led to lawsuits, like the one filed by Custodia Bank. The Fed also hasn’t withdrawn the Policy Statement on Section 9(13), which labels Bitcoin as “unsafe and unsound.”
Lummis argues that the Fed’s use of reputation risk hinders crypto firms. This makes it difficult for them to find banking partners. She believes that the Fed is still running “Chokepoint 2.0,” an anti-crypto bias.
