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There are only a few banks in the US that offer crypto companies a business relationship and give them access to payments. In the course of the crypto winter, the two most prominent banks with crypto exposure, Silvergate and Signature Bank, got into trouble. This circumstance is now being taken as an opportunity to urgently warn banks against crypto business activities.
This is how the US government discriminates crypto industry
The American Federal Reserve, the US Treasury Department and other state institutions have already made several statements to banks beforehand warned to engage in client relationships with crypto companies. In response to public pressure, Signature Bank announced that it would reduce its crypto deposits by half. The Metropolitan Commercial Bank even went a step further and announced the complete shutdown of its crypto services.
The upscaling by the Biden government is already being referred to as Operation Choke Point 2 designated. The title comes from the Obama era and describes the targeted action by the US government against undesirable sectors such as the gambling or porn industry, by making it difficult for companies to access banking services.
It’s not just about warnings
In addition to the public warnings to banks to stay away from crypto, investigations such as the one against Silvergate Bank are also acting as a deterrent for traditional financial institutions. Another means of pressure lies in ignoring license applications. Despite a preliminary commitment in April 2021, for example, the license application from the stablecoin company Paxos was abandoned after an 18-month period.
At the same time, the US Securities and Exchange Commission has forced crypto exchange Kraken to shut down its staking service. Also Coinbase CEO Brian Armstrong expressed on Twitter his concern that the SEC is taking targeted action against individual services such as staking. Even from within its own ranks, there is criticism of the US government’s crackdown. So designated SEC Commissioner Hester Peirce called the anti-crypto course “an inefficient and unfair way to go.”
Not only banks and crypto service providers should be affected by the measures. Even US states that are open to regulation, such as Wyoming, should – so far this has only been one unconfirmed rumor – have been advised to distance themselves from the industry.
Greetings from China
The US government crackdowns on crypto is a bit reminiscent of the fintech crackdown in China when Alipay and Tencent were put on the curb. The current weakness of the industry seems to be taken as an opportunity to make a tabula rasa. In the shadow of the FTX scandal, the government has given itself a free pass to do whatever law and order it likes in the crypto sector.
To put it mildly, the impression arises that the US government also partially represents the interests of Wall Street. Crypto service providers and small banks that challenge the traditional finance industry are penalized in favor of Wall Street institutions. As Goldman Sachs, JP Morgan, Bank of America, Blackrock and Fidelity gradually buy into the sector and develop their own crypto services, the original innovators and first movers are being pushed out.
Cryptocurrencies in the US: what could happen next?
One assumption could be that there will be a crypto crackdown in the USA this year, which will gradually lead to a reopening. This means that fiat gateways and crypto exposure from US banks will first come under pressure, in order to then start an American-style crypto sector 2.0 in a new regulatory guise and with new players such as the Wall Street clique in particular.
In any case, one can only hope that the US government is currently dealing with a temporary overreaction that will normalize again in the coming months as soon as moderate voices regain the sovereignty of interpretation.