US financial institutions may soon see improved interactions with digital asset companies under the proposed Federal Deposit Insurance Corporation’s (FDIC) leadership.
This change could boost the growth and adoption of the crypto industry.
FDIC Nominee Challenges Crypto Banking Restrictions
Christy Goldsmith Romero, FDIC Chair nominee, suggested that banks could provide services to digital asset companies. Romero made this statement while responding to Senator Cynthia Lummis’s question about whether these financial institutions should serve crypto companies.
“I don’t think it’s the FDIC’s role to tell banks what industries or companies they should be providing services to,” Romero stated.
Coinbase Chief Policy Officer Faryar Shirzad highlighted the importance of Romero’s statement, referencing Operation Chokepoint 2.0’s impact on the crypto sector. However, Shirzad cautioned that change might not occur unless the White House rescinds its crackdown directive and nominees commit to visibly reversing current pressures on the digital asset sector.
“The bank regulators right now claim – like the nominee suggests here – that there is no targeted debanking of the sector, and that banks are currently free to bank crypto companies subject to normal internal risk management reviews,” Shirzad stated.
Read more: 2023 US Banking Crisis Explained: Causes, Impact, and Solutions
Meanwhile, if the FDIC adheres to Romero’s stance, it would mark a significant policy reversal. Earlier this year, the FDIC, alongside the Federal Reserve and the Office of the Comptroller of the Currency, issued a notice about the risks of crypto-assets to banking organizations. They stated that business models focused on crypto activities pose significant safety and soundness concerns to the banking sector.
“Issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices,” they added.
This stance has influenced many banks to restrict or terminate services for crypto users. Erik Voorhees, founder of crypto exchange Shapeshift, recently complained on social media that fintech firm Revolut had shut down his account due to his involvement with crypto.
However, crypto companies are fighting back against these restrictions. Last month, Coinbase filed a lawsuit against the FDIC and the Securities and Exchange Commission (SEC), requesting documents relating to their approaches to crypto regulation.
Read more: How Does Regulation Impact Crypto Marketing? A Complete Guide
Similarly, the Bank Policy Institute (BPI) said it was in support of efforts to repeal the SEC Staff Accounting Bulletin 121 (SAB 121) which prevented banks from providing crypto custodial services.
“Limiting banks’ ability to offer these services leaves customers with few well-regulated, trusted options for safeguarding their digital asset portfolios and ultimately exposes them to increased risk,” BPI stated.
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