Crypto’s free pass is getting yanked as the most powerful US financial regulators rapidly close key doors to the country’s banking system.
The increasingly aggressive posture, which has taken shape through public and private actions in the weeks since the collapse of crypto exchange FTX, could push the industry to the fringes of finance. It means new ventures may be smothered before they get off the ground, and banks and digital-asset companies are likely to scrap existing ones and upend business models.
“The regulators are effectively building a wall between crypto trading and the banking and the securities markets to prevent the types of systemic vulnerabilities that led to the 2008 financial crisis,” said Todd Baker, senior fellow at Columbia University’s Richman Center for Business, Law & Public Policy.
US officials say they’re working together on crypto and deny that there’s some broad effort to crush it. They say responsible innovation that plays by the rules is fully supported.
At the same time, FTX’s sudden failure forced authorities to act on concerns that the next crypto disaster could be far more severe if digital-asset firms managed to grow large enough to affect the financial system.
Interviews with more than a dozen current and former regulators, industry executives and lobbyists paint a picture of a deepening crackdown that has the sector on its back feet. Many requested anonymity to discuss the situation candidly.
Joint Warning
Banks are getting the message that they should back away from many crypto endeavors.
Three top financial regulators kicked off the new year with a joint warning about banks’ crypto activities. The Federal Reserve, the Office of the Comptroller of the Currency and the Federal
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