Anti crypto bias persists, despite ‘lip service’

The Fed recently pulled back guidance warning banks about crypto risks. Senator Cynthia Lummis called it “lip service.”

The Federal Reserve withdrew restrictive guidance on banks holding crypto assets, but not everyone is convinced that the regulator is taking a new direction. On Friday, April 25, pro-crypto Senator Cynthia Lummis blasted the Fed for what she considers performative steps on Bitcoin.

Lummis pointed out that the Fed continues to block access to several crypto-friendly banks to master accounts. These are special types of accounts that enable the banks to participate in the Fed’s payment system directly. This has recently led to a crypto-friendly Custodia Bank suing the Fed, citing unwarranted delays in its master account application.

Fed didn’t withdraw a key anti-Bitcoin guidance: Lummis

The Senator also points to the fact that the Fed uses reputation risk when supervising banks. This applies to certain industries that, while legal, are unpopular and could damage the bank’s reputation. Notable examples include the oil industry, the marijuana industry, and crypto.

This standard is controversial as it makes it harder for legal businesses to find banking partners. Lummis claims that the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently stopped using reputation risk. However, she believes that the Fed didn’t.

Lummis also pointed out that the Fed didn’t withdraw the Policy Statement on Section 9(13). This statement calls Bitcoin and other crypto assets “unsafe and unsound”. Finally, the Senator complained that the Fed’s staff behind the supposed operation “Chokepoint 2.0” is still running the Fed today.

Operation Chokepoint refers to the supposed anti-crypto bias, or a series of coordinated actions on behalf of U.S. regulators under the Biden administration. During Joe Biden’s term in office, crypto companies complained that they found it increasingly difficult to find banking partners in the U.S. This has led many to scale back their services or look for offshore banking partners.