United States federal bank regulators are imposing restrictions on banks serving the crypto industry. This is the latest step taken by authorities who blame crypto for the bankruptcies in March last year.
Crypto and Banking
The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) have asked some banks to limit deposits from crypto companies to 15% of their total deposits for risk management purposes. Regulators have additional concerns because the real-time payment platforms preferred by crypto companies can process transactions 24/7 outside normal business hours.
Elaine Hetrick, manager of Silvergate Bank, stated that the bank decided to terminate its operations due to the increasing pressures following the FTX collapse. Other banks include Customers Bank, Cross River Bank and Western Alliance Bank. These banks faced similar regulatory pressures.
Legal Discussions and Expert Opinions
Cooper & Kirk law firm officials believe the ongoing pressure is unlawful.
“Limiting crypto deposits may violate the Constitution’s principle of due process.”
While some legal experts argue that regulators impose these restrictions in violation of boundaries, others state that they are made within the scope of banks’ risk management.
Regulators say they impose such restrictions to prevent banks from becoming overly dependent on certain industries. However, within the crypto industry, this situation is called “Operation Choke Point 2.0”.
Concerns remain that regulatory pressure is making it difficult for crypto companies to access the US dollar. Banks state that they have to reconsider their business models due to these restrictions. While some banks have shut down their operations due to restrictions on crypto deposits, others have had to update their risk management plans.
Legal Validity of Limitations
Opinions differ on whether regulators’ restrictions on crypto deposits are legal. While some experts state that, based on specific information, these restrictions do not violate the APA, others consider it a violation of the Constitution. Banks and crypto industry representatives state that regulatory pressure negatively affects the industry and restricts financial access.
Although such measures by regulators are taken to ensure that banks have a healthy and diversified deposit portfolio, banks that want to serve cryptocurrency companies are blocked.
In the US, federal regulators are placing restrictions on banks that serve crypto. These steps are considered by some experts to be a violation of the Constitution. Regulators aim to strengthen banks’ risk management.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that crypto currencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
