The United States government purportedly discourages banks from providing services to the cryptocurrency business.
Several sources informed Cointelegraph that the United States government seems to be reviving previous tactics to crack down on crypto businesses and banks giving services to the sector.
According to Nic Carter, co-founder of venture firm Castle Island and crypto intelligence firm Coin Metrics, the alleged strategy consists of isolating the traditional financial system from the crypto market by relying on “multiple agencies to discourage banks from dealing with crypto firms,” with the goal of causing crypto businesses to become “completely unbanked.”
Carter informed Cointelegraph that his assertions are based on interactions he had with bank officials, both crypto-native and conventional institutions.
The Fed, the FDIC, and the Office of the Comptroller of the Currency issued a joint statement on January 3 warning about the hazards of banks participating in crypto and asking them to desist from doing so owing to “safety and soundness” issues. Due to a new Signature Bank policy, Binance stated last month that it will only execute U.S. currency transactions exceeding $100,000.
Signature Bank said in December 2022 that it will discontinue crypto services, repay client funds, and cancel their accounts. According to reports, the bank borrowed approximately $10 billion from the U.S. Federal Home Loan Bank System in the fourth quarter of 2022 owing to liquidity problems caused by the bear market and the collapse of the FTX cryptocurrency exchange.
Aaron Kaplan, co-CEO of blockchain fintech Prometheum and counsel at law firm Gumrae Kaplan Nusbaum, told Cointelegraph: “There is a particular concern with crypto exchanges and related intermediaries that operate outside of the United States, as their choice of jurisdiction typically prioritizes profit maximization, often to the detriment of the customer.”
Coinbase CEO Brian Armstrong said on Twitter that another focus for U.S. authorities seems to be banning crypto staking services for retail clients. Staking is a method that enables crypto investors to lock their crypto assets inside a smart contract in exchange for incentives and passive income.
The procedures used by U.S. officials are not unique. Operation Choke Point, a 2013 federal regulatory campaign, targeted a range of “high-risk” sectors and increased oversight of financial institutions supplying services to these enterprises.
Also Read: Kraken To Discontinue US Crypto Staking Service And Pay $30M Fine As Part Of SEC Settlement
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