The comment period for Federal Reserves’ newly proposed payment and account access guidelines came to an end today. This new regulation is very critical for the crypto ecosystem as per Caitlin Long, founder, and CEO of Avanti crypto bank.
1/ THREAD ABT REGULATORY NEWS in #crypto, which I’ve been chronicling on twitter since April. Seems crackdown has begun. I dunno how it'll turn out but:
* it won't impact #BTC #ETH etc directly. Base layers will keep addin' blocks
* it'll impact intermediaries & US$ access points
— Caitlin Long 🔑 (@CaitlinLong_) July 13, 2021
The new payment and account access guidelines set principles for depository institutions to be able to access the Fed & its US$ services directly. Although the proposed payment access guidelines have no mention of cryptocurrencies, Long believes it would impact the crypto market indirectly. Long explained that under the new set of regulations, feds can attack the intermediaries such as onboarding points, US Dollar access points, and fiat gateways.
Why does it matter? Fed guidelines are partly aimed at crypto (despite not mentioning crypto even once). Given what’s happening w/ US$ stablecoins, the guidelines are esp relevant.
Long said the regulation is especially very relevant for the stablecoin industry given another regulation in the form of STABLEAct was introduced in the first quarter of 2021. The proposed regulation would allow US banks to deal in digital assets and even launch their stablecoin.
How Fed can use the new regulation against crypto?
Long explained that the direct access to fed’s reserves might not seem like a big problem to many but the harsh reality is, banking access is critical to the trading business. She also drew attention to the 2017 crackdown by the US government when they asked banks to suspend all services for crypto companies. As a result, a majority of crypto firms either shut down or relocated to other nations.
The lack of banking access for crypto firms is a two-way sword, where on one side crypto firms can’t get banking access, while feds can’t keep track of illegal activities in the crypto ecosystem. Thus, in search of a compliant crypto future, the fed should find a midway to avoid the clash and work with regulators.
The SEC commissioner Gary Gensler has called for investor protection laws to be implemented on crypto platforms as well but hasn’t put forward any framework of guidelines to do so.