It is clear that cryptocurrencies like Bitcoin (BTC) are taking the world by storm, becoming more popular in numerous regions around the world. In the United States, however, crypto banking is facing a major challenge. Federal regulators. Simply put, cryptos can’t flourish in the US the way they should, primarily because the crypto market needs access to traditional banks. But current crypto regulations are standing as a barrier, all but forcefully keeping digital currencies out of the broader banking system.
Most recently, the crypto banking focused Custodia Bank sought membership of the Federal Reserve Board (FRB.) However, this membership was rejected in January. But the rejection didn’t come as a surprise, mainly due to what experts have been saying for some time; that federal regulators appear to be coordinating their response to the crypto sphere. This is to say that every effort is being made to surround digital currencies with regulatory borders, thereby keeping digital currencies out of broader banking systems.
In fact, the rejection of Custodia Bank came just hours after the Biden administration made a call to congress. The call urged officials to step up efforts on cryptocurrency regulations, with specific emphasis put on not greenlighting mainstream crypto institutes. The call stressed that deepening ties between crypto banking and broader banking systems would be a grave mistake.
The call by the Biden administration seems to have had far-reaching consequences, with another blow felt in Kansas City. The Federal Reserve Bank of Kansas City suddenly came to a conclusion regarding Custodia Bank’s application for a master account. The application was unceremoniously denied.
Then, following Custodia’s dual rejections by the FRB and the Federal Reserve Bank of Kansas City, rumours began to circulate. Rumours that, against the hopes of Custodia, new crypto regulations were already being worked on. It therefore seems inevitable that more policies will be put in place to restrict the crypto market from expanding.
Meanwhile, cryptos Praxos and Protego, both having previously made progress, also reportedly ran into roadblocks. Both cryptos had been given conditional approval by the Office of The Controller of Currency (OCC) in early 2021, potentially allowing them to pivot into being nationally chartered trust banks. But, after initial success, it all seemed to go horribly wrong.
Rumours swirled that the applications would be rejected, though a Praxos spokesperson was quick to step up. The spokesperson hastily declared that the rumours were false, and that the OCC had not come to any official conclusions. However, it wasn’t long after that Praxos announced it would no longer be offering Binance USD. Furthermore, the spokesperson confirmed that the order had come from the New York Department of Financial Services, forcing the issue.
Another blow for crypto banking.
2021 seemed to be the year that cryptos would finally be more widely accepted. Many lobbyists took their cases directly to US lawmakers, insisting that digital currencies hold many benefits. As 2021 passed into 2022, progress seemed to be inching forward. But then, as 2022 got into full swing, everything suddenly seemed to turn sour.
Georgia Quinn, speaking for Anchorage Council, declared that the sudden change in attitudes is extremely disheartening. She explained that she had spent much of 2021 trying to make US regulators understand that cryptos are a way forward. However, she continued, it seems like all the progress made in 2021 is out the window.
Even still, Quinn seems upbeat. She pointed out that more cryptocurrency guides and cryptocurrency regulations aren’t necessarily a bad thing, and that in many cases additional regulations are a path to wider acceptance. She continued that she feels crypto banking still has a place in the US, but that in order to achieve widespread acceptance digital currencies must be tied to regulated US banking.
Quinn may be right, but broader perceptions are that cryptos have a lot of recovering to do after 2022. The current view of cryptos isn’t ideal, especially given the various hacks, accusations of laundered money, and the fall of FTX. Simply put, the sour view of cryptos is beginning to congeal into crypto regulations, with the Biden administration having already made its stance on the matter clear.
As most already know, momentum is often an unstoppable force when it comes to Washington D.C. Which is to say; once the tides have started to move in a direction, they tend to keep moving in that direction. So cryptos not only have to recover, they have to turn the already moving negative tides.
Even still, former acting White House chief under Trump, Mick Mulvaney, says the situation isn’t cast in stone. He explained that there is a lot of debate happening at Capitol Hill right now and that final decisions have yet to be made.
Major cryptos like Bitcoin (BTC) and Ether (ETH) are flourishing, despite potentially negative stances taken by lawmakers. In fact, 2023 is seeing a major surge, with Bitcoin and Ether in particular soaring to respectable heights. Hence, whether lawmakers do or don’t implement more regulations, it seems like the world is still widely accepting cryptos. Plus, as pointed about by Georgia Quinn, regulations might be exactly what’s needed to achieve broader acceptance.
Meanwhile, in regions like the United Kingdom, Canada, Australia, and New Zealand, cryptos are continuing to gain ground. Though, the stance on cryptos in these regions is much more openly positive. In the UK, in particular, the government has all but embraced crypto banking with plans already underway to introduce a global cryptoasset technology hub. Steps are also being taken to bring cryptos into existing UK regulatory systems, with the process set to be done via the Financial Services and Markets Bill.
Even if the US is currently lagging behind in terms of crypto acceptance, the rest of the world seems to be surging ahead. How it all works out remains to be seen but perhaps the US may still be swayed by the positive stance taken by the UK.
