Crypto Debanking: Trump's Impact?
Cryptocurrency businesses continue to face significant challenges accessing banking services, despite expectations of a more favorable regulatory environment under the Trump administration. While some easing of enforcement against major firms is evident, fundamental banking policies remain largely unchanged, creating a disconnect between perception and reality.
Persistent Debanking Issues
- Ongoing Debanking: Crypto firms still struggle to secure banking relationships.
- Outdated FDIC Policies: The Federal Deposit Insurance Corporation's (FDIC) outdated policies hinder crypto integration into traditional banking.
Caitlin Long, CEO of Custodia Bank, voiced concerns at ETHDenver on February 28th, highlighting the lack of meaningful progress in addressing crypto debanking issues. She emphasized that federal banking agencies haven't reversed their anti-crypto guidance, leaving the industry grappling with uncertainty.
“It is still presumed unsafe and unsound for a bank to touch a digital asset even in a de minimis amount. That is going to change, no doubt, but [concrete action is lacking].”
FDIC Reform: A Critical Need
Long advocates for urgent FDIC reform, citing the need for new leadership to adapt to technological advancements. She criticizes the agency's resistance to change under Martin Gruenberg's 15-year tenure.
“This is why the banking system is so backwards in this country, because for the last 15 years, we’ve had somebody who isn’t interested in any change.”
The recent change in FDIC leadership from Gruenberg to Acting Chair Travis Hill doesn't fully alleviate concerns, as Gruenberg faced accusations of leading "Operation Chokepoint 2.0," allegedly aimed at cutting off crypto firms from banking. While the SEC has shown a shift in stance, similar changes within banking regulations are still needed.
The Path Forward: Stablecoins and Bank Stability
Long supports the swift passage of stablecoin legislation, but stresses the importance of robust consumer protections and adequate bank cash reserves. She points out a critical vulnerability in the current banking system:
“The average bank in the United States right now holds 8 cents in cash against every $1 of demand deposits… That’s fundamentally unstable and fundamentally susceptible to a bank run.”
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