Senator Cynthia Lummis criticises the Federal Reserve’s recent actions regarding crypto, calling their changes insincere. She raises concerns over restrictions on crypto banks’ access to essential accounts and continues the conversation on reputation risk. Furthermore, Lummis points out the Fed’s failure to rescind anti-Bitcoin language and the potential influence of the controversial operation Chokepoint 2.0, indicating an ongoing anti-crypto bias.
On April 25, Senator Cynthia Lummis expressed her frustration with the Federal Reserve’s recent actions regarding cryptocurrency, labelling their efforts as mere “lip service.” Despite the Fed’s decision to relax guidance for banks concerning crypto assets, Lummis argues that this change falls short. She emphasised that the Fed still restricts access to crucial master accounts for several crypto-friendly banks, which hinders their participation in the Fed’s payment system directly.
One particular case, mentioned by Lummis, involves Custodia Bank, which has initiated legal action against the Fed. The bank alleges that its application for a master account has been unnecessarily delayed. This situation highlights the ongoing tension between traditional banking frameworks and emerging crypto businesses.
Additionally, Lummis noted that the Fed continues to use reputation risk as a criterion for supervising banks. This principle reportedly applies to certain sectors that, while legally operating, are perceived negatively by the public or financial institutions, such as the oil, marijuana, and cryptocurrency industries. The Senator believes that this standard unjustly complicates banking relationships for otherwise legal operations in crypto.
She pointed out that other regulatory bodies, like the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, have recently moved away from using the reputation risk framework, unlike the Fed. Furthermore, she highlighted that the Federal Reserve did not rescind its Policy Statement on Section 9(13), which deems Bitcoin and similar crypto assets as “unsafe and unsound.”
Moreover, Lummis raised concerns over the continued existence of the staff managing the controversial operation known as “Chokepoint 2.0.” This initiative is seen as an embodiment of the anti-crypto stance taken by U.S. regulators under the Biden administration. Crypto firms have lamented the increasingly daunting environment for securing banking relationships during Biden’s presidency, part of which has forced some to consider foreign alternatives for their financial needs.
