US Senator Cynthia Lummis Calls Out Fed Crypto Policy Withdrawal, Here’s Why

US Senator Cynthia Lummis has sharply criticized the Federal Reserve’s recent move to withdraw guidance on cryptocurrency activities. She argued that the decision does not represent genuine progress for the digital asset industry and raised concerns about the ongoing regulatory challenges facing crypto companies.

Lummis, a staunch advocate for cryptocurrency, believes that the Federal Reserve’s actions will continue to stifle innovation and create unnecessary hurdles for businesses in the space.

Cynthia Lummis Concerns Over the Fed’s Crypto Guidance Withdrawal

Senator Cynthia Lummis took to X (formerly Twitter) to express her dissatisfaction with the Federal Reserve’s decision to rescind certain supervisory guidance regarding cryptocurrency activities. She emphasized that despite the Fed’s actions, the core issues facing the crypto industry remain unresolved.

“The Fed withdrawing crypto guidance is just noise, not real progress,” Lummis said. “We are NOT fooled.” According to Lummis, the Fed’s withdrawal of guidance is not a real step forward and fails to address the underlying problems. In a further statement, Lummis said,

“I will continue to hold the Fed accountable until the digital asset industry gets more than a life jacket, Chair Powell—they need a fair shake.”

Cynthia Lummis also criticized the Federal Reserve for undermining the digital asset industry with previous regulatory actions. She pointed out that the Fed’s stance had led to the closure of crypto businesses and hampered innovation. In her view, the Fed’s policies have done significant harm to American interests by preventing the crypto industry from reaching its full potential.

Fed’s Regulatory Approach to Crypto Assets

The decision by the Federal Reserve to withdraw certain supervisory letters represents a new direction in handling of the cryptocurrency industry. These letters had earlier requested banks to obtain prior permission when they intended to undertake activities concerning stablecoins and other cryptocurrencies.

By withdrawing this guidance the Fed follows similar tendencies of other regulators, including the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) who have also shifted to more lenient approach to banking services related to crypto.

Despite these changes, Caitlin Long, founder of Custodia Bank, like Cynthia Lummis, has raised concerns about the Federal Reserve’s continued stance on digital assets. According to Long, the Fed had not withdrawn its guidelines published back in January 2023 that stated that Bitcoin and other cryptocurrencies remained “unsafe and unsound.”

Cynthia Lummis Criticism of the Fed’s Master Account Policy

Senator Cynthia Lummis also pointed out the negligence of the Federal Reserve in not addressing the concerns of master accounts, allegedly used illegally to limit banking services for crypto enterprises.

The Fed’s noncompliance with the law of master accounts has not been well received by Lummis and other members of the crypto community. In her opinion, this still keeps the crypto companies from being on the same level as normal traditional firms. Master accounts are necessary for banks to receive specific services from the Fed, and Lummis says that this constitutes unequal treatment of crypto.

She appealed to the Federal Reserve to cease employing reputation risk as the guiding principle for crypto activities, and its detrimental effect on innovation. According to Lummis, despite the swearing in of a new US SEC Chair,  the Fed is stifling the growth of the crypto industry by not allowing broad access to these accounts.