US senators write to banking regulators about potential crypto discrimination

Four United States Republican senators led by Bill Hagerty have written a letter to the heads of federal banking regulatory agencies, questioning the ideological motivation behind recent regulatory moves in regard to cryptocurrency. They compared the regulators’ policies to the Obama administration’s Operation Choke Point.

The senators addressed Federal Reserve Board Chair Jerome Powell, Federal Deposit Insurance Corporation (FDIC) Chair Marty Gruenberg and Office of the Comptroller of the Currency (OCC) Acting Comptroller Michael Hsu. The March 9 letter said that their agencies, along with the White House, have issued statements on heightened supervision that have resulted in unfortunate consequences for the cryptocurrency sector, such as the closing of crypto firms’ bank accounts.

The senators were referring to the joint statement released by those agencies on Jan. 3 that said in part, “Issuing or holding as principal crypto-assets […] is highly likely to be inconsistent with safe and sound banking practices.” In addition, they pointed to a February Fed policy statement that said, making specific reference to crypto, that “legal permissibility is a necessary, but not sufficient, condition” for banking activity, and the Biden administration’s January “road map” that called for agencies to “ramp up enforcement.”

“This coordinated behavior seems disturbingly reminiscent of Operation Choke Point,” the senators wrote. In that operation, “federal regulators applied pressure on financial institutions to cut off financial services to certain licensed, legally operating industries simply because certain regulators and policymakers disfavored those industries.” They added:

“We are especially worried that overreaching behavior by the banking regulators will inevitably bleed into other legal industries.”

The senators posed a number of questions to the regulators. They asked how their increased supervision will help consumers, whether it is possible for banks to provide services to crypto firms at all under the updated guidance,

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FDIC calls out FTX US, other crypto firms over insurance claims

WASHINGTON — The Federal Deposit Insurance Corp. issued five cease-and-desist letters on Friday telling five cryptocurrency-related companies to stop making false and misleading statements about the availability of deposit insurance for their customers.

The FDIC announced Friday afternoon that it had directed five companies behind certain crypto websites — including FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com — to “take immediate corrective action to address false or misleading statements” concerning whether their customers’ funds were insured by the federal agency.

Under the Federal Deposit Insurance Act, the FDIC has the authority to prohibit use of the agency’s name or logo to imply customer funds are government insured when they are not. Each of the letters — which were signed by FDIC assistant general counsel Seth Rosebrock — noted that the FDIC had the authority to assess civil money penalties as well.

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The Federal Deposit Insurance Corp. sent letters to FTX US and other cryptocurrency firms for purportedly implying that crypto assets were FDIC insured, the latest in a series of efforts by the agency to clear up what it says are misleading claims by crypto firms with bank partnerships.

Bloomberg News

“Based upon evidence collected by the FDIC, each of these companies made false representations — including on their websites and social media accounts — stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured ,” the agency said in a press release. “In one case, a company offering a so-called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC.”

The orders follow a similar one issued against Voyager, a cryptocurrency company that went bankrupt in July, after customers scrambled to understand what would happen to their dollars held by a partner bank after the crypto

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