(Kitco News) - As the crypto market consolidates following its best January since 2013, rumors have begun to swirl that the U.S. government has a secret plot to destroy the crypto industry via the regulatory power it wields over banking.
CoinMetrics co-founder Nic Carter brought the conversation into the realm of the public in a guest post for PirateWires, alleging that the U.S. government is using the banking sector to execute a widespread and systematic crackdown against the crypto industry. Carter referred to the ongoing moves by the government as “Operation Choke Point 2.0.”
“Specifically, the Biden administration is now executing what appears to be a coordinated plan that spans multiple agencies to discourage banks from dealing with crypto firms,” Carter said.
While there is plenty of evidence to support Carter’s claims, such as Signature Bank halting USD transfers of less than $100,000 from Binance, or the closing of the crypto unit at Metropolitan Commercial Bank, the government's efforts might be too little, too late as many in the industry now see crypto as inevitable.
Included in that crowd is Michael Demissie, the head of digital assets at Bank of New York Mellon (BNY Mellon), who remains steadfast in his belief that institutional interest in digital assets will remain high despite the struggles the industry faced in 2022.
While speaking on a cryptocurrency panel at Afore Consulting's 7th Annual FinTech and Regulation Conference on Wednesday, Demissie asserted that the digital asset industry is “here to stay” as institutional investors have a strong interest in crypto.
His position is supported by the results of a study conducted by the bank in 2022 which showed that 91% of custodian bank clients are interested in investing in blockchain-based tokenized products. Additionally, the survey found that 86% of institutional players are adopting a “buy and hold” strategy, suggesting that they hold a positive view of the long-term outlook of the asset class.
Seventy percent of the bank's clients also said they would increase their digital asset activity if services like custody and execution become available from recognized, trusted institutions. And 88% of the bank's clients said they would be moving forward with their plans despite the 2022 market crash.
“What we see is clients are absolutely interested in digital assets, broadly,” Demissie said, according to a report from Reuters.
BNY Mellon’s head of digital assets also highlighted the need for more regulatory clarity from Washington, which would allow industry players to move forwards with their crypto plans with less uncertainty.
"We absolutely need clear regulations and rules for the road. We need responsible actors who can offer reliable services that live up to investor's trust," he said, adding, "It's important that we navigate this space in a responsible way.”
During a Q4 earnings call that took place in January, Robin Vince, the CEO of BNY Mellon, said the bank remains dedicated to advancing its longer-term growth initiatives, which include digital assets.
“We went live with our digital asset custody platform in the U.S. in October. [...] this will continue to be a focus for us, not so much for crypto, but really the broader opportunity that exists across digital assets and distributed ledger technology,” Vince said. “If anything, the recent events in the crypto market only further highlight the need for trusted regulated providers in the digital asset space.”
The CEO went on to acknowledge that cryptocurrencies are unlikely to become a major source of revenue for the bank in the near future, and instead encouraged those on the call to focus on the long-term outlook.
“Specifically for digital assets, it's the longest-term play out of any of the things that we talked about,” Vince said. “I expect it to be negligible from a revenue point of view over the course of the next couple of years. It might be negligible for the next five years.”
According to Vince, ignoring digital assets “would be like being the custodian of 50 years ago and sticking with paper and not adopting a computer,” adding, “That's not going to be us.”
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BNY Mellon, America's oldest investment bank and the world's largest custody bank, revealed in October that it was launching crypto custody services to enable its customers to hold their cryptocurrency assets alongside their traditional investments on the same platform – becoming the first large U.S. bank to do so.
The bank was able to make this move after it was granted approval for a Fed master account, which sparked a lawsuit and allegations of favoritism from Wyoming-based Custodia bank, whose application for a Fed master account has been pending since October 2022.
BNY Mellon is the first of the eight systemically important U.S. banks to store digital currencies and allow customers to use one custody platform for both its traditional and crypto holdings.
Goldman Sachs has also expressed interest in purchasing crypto firms in the wake of the devastation caused by the bankruptcy of FTX and has partnered with index provider MSCI and crypto data firm Coin Metrics to develop a crypto classification service.
