Is The US Government Repressing Cryptocurrency in Secret?
Since the beginning of the year, the crypto business has been under more significant regulatory pressure, prompting Twitter speculation over whether the U.S. government is attempting to clamp down on the whole industry quietly.
Coinbase CEO Brian Armstrong has provided the most recent piece of the theory’s jigsaw. A few hours earlier, Armstrong said on Twitter that the U.S. Securities and Exchange Commission (SEC) was looking to prohibit retail staking in the country.
Jake Chervinsky, chief policy officer at the Blockchain Association, confirmed the rumor. “I’ve heard the same rumor and strongly agree with Brian that an attack on staking would be an extreme error in U.S. policy,” the attorney said.
Cryptocurrency Crackdown Rumors
Since yesterday’s announcement, Kraken, one of the major US exchanges, has been the subject of an SEC inquiry. The reason is that the company is accused of selling unregistered securities to people in the United States.
But, the assault against the crypto business is far more profound. Nic Carter, a journalist, wrote:
I don’t want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut off its connectivity to the banking system – and it’s working.
According to author Samuel Andrew, the Federal Reserve and the OCC are now conducting a massive crypto-debunking operation. “What is going on is draconian and aimed to kill crypto,” a source said to Andrew.
According to the analyst, the Fed and the OCC are going after crypto-friendly states like Wyoming and financial institutions like Morgan Stanley and Custodia. A second source informed Andrew that the OCC had warned Paxos and others that their applications for banking licenses would be denied unless they were withdrawn by Friday.
“V.C.s are starting to become very, very concerned that their crypto portfolio companies are being de-banked en masse,” Andrew cited another source, continuing, “The OCC is said to produce a paper shortly that is said to be so draconian that a sizable portion of OCC employees may depart.”
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U.S. Government Leaves Behind Clues
The U.S. government seems to be paying particular attention to the financial ties between businesses and banks. As Binance recently announced for U.S. consumers, the ultimate objective may be for crypto firms to have no bank relationship, making it impossible for them to make payments and withdrawals in fiat currency (not Binance US). But stablecoins may also have difficulties.
According to Carter wrote, there are several indicators. On December 7, Signature Bank announced its plan to halve cryptocurrency customers’ deposits. The Fed, FDIC, and OCC issued a joint statement on the security concerns associated with cryptocurrency transactions for banks on January 3.
On January 9, 2019 (only a few days later), Metropolitan Commercial Bank ceased all crypto-related services. Binance adopted Signature Bank’s policy of processing only fiat transactions above $100,000 on January 21.
The Federal Reserve warned banks on January 27 not to store cryptocurrency or create stablecoins after rejecting a two-year application from crypto bank Custodia to join the Federal Reserve System. On the same day, the National Economic Council published a policy statement that strongly urged banks not to serve clients who used cryptocurrencies but did not officially prohibit doing so.
It wasn’t until the first week of February that things finally calmed down. Due to its business interactions with FTX and Alameda, the DOJ has initiated an inquiry against Silvergate. The Federal Reserve’s statement from January 27 was published in the Federal Register on Tuesday, making it a final regulation without requiring scrutiny by Congress.
It is unclear if the attempts will be successful or whether the U.S. crypto business will be able to weather the strain. Otherwise, the sector may be compelled to go overseas.