Rep. Emmer accuses the U.S. government of colluding to cut off crypto from the banking industry
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(Kitco News) - Amid increasing chatter among the crypto community that the recent struggles experienced by crypto-focused banks are all part of a concerted effort by the U.S. government to cut off crypto from the banking industry, one member of Congress is making his concerns public.
On Tuesday, Tom Emmer, Majority Whip of the U.S. House of Representatives, sent a letter to Federal Deposit Insurance Corporation (FDIC) chair Martin Gruenberg, calling on the FDIC head to answer the question as to whether the agency has specifically instructed banks not to provide services to crypto firms.
“Recent reports indicate that Federal financial regulators have effectively weaponized their authorities over the last several months to purge legal digital asset entities and opportunities from the United States,” Emmer wrote.
The representative cited the recent comments from former House Financial Services Committee chair Barney Frank, co-author of the Dodd-Frank Act, who said during an interview on Monday that the targeted nature of these regulatory efforts is meant to send the message that crypto is toxic and should be avoided.
“If this is the case, these actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer wrote.
Emmer’s letter mentioned the joint statement released by the Fed, FDIC and the Office of the Comptroller of the Currency in January that discouraged banks from holding crypto or serving crypto clients, the Feds public statement issued in February that “seemingly turned this perspective into a final” without a public comment period and the Biden Administration’s “Roadmap to Mitigate Cryptocurrenices’s Risks” as further evidence of a coordinated effort to malign the industry.
“In under a week, regulatory statement-driven market fear drove mass withdrawals at the few remaining banks that provide legal crypto firms access to financial services,” Emmer said. “The Administration’s demonstrated effort to choke off digital assets from the United States financial system is a lazy and destructive regulatory strategy that is stagnating innovation and subjecting American users of digital assets to less sophisticated regulatory jurisdictions.”
Emmer added that while Congress is focused on working across the aisle to develop nonpartisan legislative solutions for the crypto community, “Reports indicate that this Administration may be driven by a political agenda that has already harmed everyday Americans.”
The Congressman has called on the FDIC to officially answer whether it has instructed banks under its supervision to not provide crypto firms banking services, and if so, to explain the analysis for this instruction and “the goal of the instruction if not to discourage banks from servicing digital asset clients.”
Emmer also wants the FDIC to indicate whether it has explicitly or implicitly communicated with any banks that “their supervision will be more onerous in any way if they take on new (or maintain existing) digital asset clients.”
The Majority Whip highlighted that the real culprit behind the recent banking turmoil is the Federal Reserve and wants to know how the FDIC has helped banks deal with the ramifications of rising rates.
“There have been allegations that these bank closures happened because crypto is “risky,” when in reality these institutions appear to have been impacted less by the volatility of digital assets and more by the unprecedented interest rate hikes we have witnessed over the last twelve months,” he said. “What, if any, guidance has the FDIC provided to financial institutions to help them manage and mitigate the risks of rising rates?”
Emmer is calling on Gruenberg and the FDIC to answer these questions no later than 5:00 p.m. on March 24.
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The banking struggles for the crypto industry escalated last Wednesday when crypto-focused Silvergate Bank announced that it would be winding down operations. Silicon Valley Bank met its demise just two days later after an overnight run on deposits that saw $41 billion in cash leave the bank's balance sheet.
Over the weekend, the government announced that it was taking over Signature Bank in an effort to avoid a deepening of the banking contagion, which led to Barney Frank’s comments.
On Tuesday, the New York State Department of Financial Services pushed back against Frank’s comments, saying that the decision to close Signature bank had “nothing to do with crypto,” and was instead related to “a significant crisis of confidence in the bank’s leadership” that occurred over the weekend after regulators shuttered Silicon Valley Bank.