Recent adjustments by the Federal Reserve, pulling back specific guidance warning banks about digital asset risks, haven’t convinced key Washington figures that a genuine shift in Fed crypto policy is underway. Senator Cynthia Lummis, a vocal advocate for the blockchain industry, dismissed the move as mere “lip service” in late April.
The pro-crypto senator argues the Federal Reserve’s actions lack substance, suggesting they are more performative than practical. Lummis contends that the regulator continues to erect significant barriers for the crypto sector.
One major point of contention is the ongoing denial of master accounts to several crypto-focused financial institutions. These crucial accounts grant banks direct access to the Fed’s payment systems, a vital function for full participation in the financial system. The difficulty in obtaining these has even pushed firms like Custodia Bank to pursue legal action against the Fed over alleged delays.
Furthermore, Lummis highlighted the Fed’s continued use of “reputation risk” assessments during bank supervision. This standard allows regulators to scrutinize banks dealing with legal yet potentially controversial sectors, including digital assets, alongside industries like oil or marijuana.
This practice is contentious, potentially hindering legitimate businesses from securing essential banking partnerships. According to Lummis, other key regulators like the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have moved away from using reputation risk in this manner, but the Fed has not followed suit.
Adding to her critique, the Senator noted the Federal Reserve did not retract its critical Policy Statement on Section 9(13). This document explicitly labels crypto assets as potentially “unsafe and unsound,” maintaining a fundamentally cautious, if not hostile, stance towards the sector.
Lummis also raised concerns about the persistence of personnel within the Fed allegedly associated with “Operation Chokepoint 2.0.” This term describes perceived coordinated efforts by U.S. regulators under the current administration to limit crypto companies’ access to banking services.
These alleged regulatory pressures have reportedly made it increasingly challenging for crypto firms to operate within the U.S. banking system, forcing some to curtail services or seek partners overseas. Lummis’s comments underscore the view that despite minor guidance changes, significant regulatory hurdles and skepticism towards crypto banking persist within the Federal Reserve.