Cryptocurrency: Operation Choke Point - USA Slaughters "Securities" And Banking Paths
This happened because crypto pussies spent years on their knees as apologists for the law, asking for permission and regulation to work within the law, instead of demanding the silly law become null. So they got what they asked for... fucked by the law, more accurately, by the same bunch of GovBankPols who've been fucking over you and the Freedom of Humanity for at least the last 110 years. So long as you remain Sheeple, you will never attain Freedom. Stop being fucking Sheeple. Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs Detailing the Biden Admin's coordinated, ongoing effort across virtually every US financial regulator to deny crypto firms access to banking services https://www.piratewires.com/p/crypto-choke-point https://twitter.com/nic__carter https://www.cei.org/wp-content/uploads/2014/08/Iain-Murray-Operation-Choke-P... https://thehill.com/blogs/congress-blog/politics/415478-operation-choke-poin... https://twitter.com/nic__carter/status/1622973966360133634/retweets/with_com... https://www.coindesk.com/business/2022/12/06/crypto-bank-silvergate-slides-f... https://finance.yahoo.com/news/signature-bank-sbny-reduce-crypto-130301487.h... https://www.fdic.gov/news/press-releases/2023/pr23002a.pdf https://investors.mcbankny.com/news-events/news/news-details/2023/Metropolit... https://www.bloomberg.com/news/articles/2023-01-22/binance-says-signature-se... https://www.federalreserve.gov/newsevents/pressreleases/orders20230127a.htm https://www.mayerbrown.com/en/perspectives-events/publications/2023/02/feder... https://www.whitehouse.gov/nec/briefing-room/2023/01/27/the-administrations-... https://archive.is/fF2i3 https://www.coindesk.com/business/2023/02/06/crypto-exchange-binance-to-susp... https://www.federalregister.gov/documents/2023/02/07/2023-02192/policy-state... https://archive.is/jnxFx https://www.banktrack.org/article/three_banks_step_away_from_dakota_access_p... https://www.nytimes.com/2018/04/10/business/bank-of-america-guns.html https://twitter.com/AOC/status/1085380063112105984 https://www.cato.org/blog/racial-equity-beyond-feds-scope https://www.sec.gov/sec-response-climate-and-esg-risks-and-opportunities https://www.federalreserve.gov/newsevents/pressreleases/other20230117a.htm https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/04/fact... https://www.forbes.com/sites/ericfan/2022/06/21/revolving-door-riches-how-ob... https://www.piratewires.com/p/readable-twitter-files https://www.coindesk.com/twitter-trump-private-company-fallacy https://luetkemeyer.house.gov/news/documentsingle.aspx?DocumentID=398946 https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-14.html https://www.piratewires.com/p/twitter-vs-the-cathedral https://www.bloomberg.com/news/articles/2023-01-05/silvergate-tumbles-after-... https://www.washingtonpost.com/technology/2022/12/14/sec-gensler-crypto-ftx/ https://twitter.com/jchervinsky/status/1622979885143662592 https://www.wsgr.com/en/insights/demystifying-the-banking-regulators-recent-... https://archive.is/GeLLG Nic Carter The Biden Administration is quietly trying to ban crypto. Nic Carter explains in an explosive guest post for Pirate Wires. -Solana What began as a trickle is now a flood: the US government is using the banking sector to organize a sophisticated, widespread crackdown against the crypto industry. And the administration’s efforts are no secret: they’re expressed plainly in memos, regulatory guidance, and blog posts. However, the breadth of this plan — spanning virtually every financial regulator — as well as its highly coordinated nature, has even the most steely-eyed crypto veterans nervous that crypto businesses might end up completely unbanked, stablecoins may be stranded and unable to manage flows in and out of crypto, and exchanges might be shut off from the banking system entirely. Let’s dig in. For crypto firms, obtaining access to the onshore banking system has always been a challenge. Even today, crypto startups struggle mightily to get banks, and only a handful of boutiques serve them. This is why stablecoins like Tether found popularity early on: to facilitate fiat settlement where the rails of traditional banking were unavailable. However, in recent weeks, the intensity of efforts to ringfence the entire crypto space and isolate it from the traditional banking system have ratcheted up significantly. Specifically, the Biden administration is now executing what appears to be a coordinated plan that spans multiple agencies to discourage banks from dealing with crypto firms. It applies to both traditional banks who would serve crypto clients, and crypto-first firms aiming to get bank charters. It includes the administration itself, influential members of Congress, the Fed, the FDIC, the OCC, and the DoJ. Here’s a recap of notable events concerning banks and the policy establishment in recent weeks: On Dec. 6, Senators Elizabeth Warren, John Kennedy, and Roger Marshall send a letter to crypto-friendly bank Silvergate, scolding them for providing services to FTX and Alameda research, and lambasting them for failing to report suspicious activities associated with those clients On Dec. 7, Signature (among the most active banks serving crypto clients) announces its intent to halve deposits ascribed to crypto clients — in other words, they’ll give customers their money back, then shut down their accounts — drawing its crypto deposits down from $23b at peak to $10b, and to exit its stablecoin business On Jan. 3, the Fed, the FDIC, and the OCC release a joint statement on the risks to banks engaging with crypto, not explicitly banning banks’ ability to hold crypto or deal with crypto clients, but strongly discouraging them from doing so on a “safety and soundness” basis On Jan. 9, Metropolitan Commercial Bank (one of the few banks that serve crypto clients) announces a total shutdown of its cryptoasset-related vertical On Jan. 9, Silvergate stock falls to a low of $11.55 on bank run and insolvency fears, having traded as high as $160 in March 2022 On Jan. 21, Binance announces that due to policy at Signature bank, they will only process user fiat transactions worth more than $100,000 On Jan. 27, the Federal Reserve denies crypto bank Custodia’s two-year application to become a member of the Federal Reserve system, citing “safety and soundness” risks On Jan. 27, the Kansas City Fed branch denies Custodia’s application for a master account, which would have given it the ability to use wholesale payment services, and to hold reserves with the Fed directly On Jan. 27, the Fed also issues a policy statement which discourages banks from holding cryptoassets or issuing stablecoins, and broadens their authority to cover non-FDIC insured state-chartered banks (a reaction to Wyoming Special Purpose Depository Institutions (SPDIs) like Custodia, which can hold crypto alongside fiat for its banking customers) On Jan. 27, the National Economic Council releases a policy statement not explicitly banning banks from serving crypto clients, but strongly discouraging banks from transacting with cryptoassets directly or maintaining exposure to crypto depositors On Feb. 2, the DoJ’s fraud unit announces an investigation into Silvergate over their dealings with FTX and Alameda On Feb. 6, Binance suspends USD bank transfers for retail clients (Binance US was not affected) On Feb. 7, the Jan. 27 Fed statement is entered into the federal register, turning the policy statement into a final rule, with no Congressional review, or public notice-and-comment period As of Feb. 8, Protego and Paxos’ applications to follow Anchorage and obtain full approval to become National Trust Banks are still outstanding (past the 18 month deadline), and appear likely to be imminently denied by the OCC In sum, banks taking deposits from crypto clients, issuing stablecoins, engaging in crypto custody, or seeking to hold crypto as principal have faced nothing short of an onslaught from regulators in recent weeks. Time and again, using the expression “safety and soundness,” they’ve made it clear that for a bank, touching public blockchains in any way is considered unacceptably risky. While neither the Fed/ FDIC/ OCC statement — nor the NEC statement a few weeks later — explicitly ban banks from servicing crypto clients, the writing is on the wall, and the investigations into Silvergate are a strong deterrent to any bank considering aligning itself with crypto. What is clear now is that issuing stablecoins or transacting on public blockchains (where they could circulate freely, like cash) is highly discouraged, or effectively prohibited. It is equally evident that a bank-issued fiat token would only be acceptable to regulators if it were domiciled on a surveilled, private blockchain. No ‘unhosted’ wallets allowed. 1 And perhaps most damagingly, the Fed’s devastating denial of Wyoming SPDI bank Custodia, as well as their policy statement, effectively ends any hopes that a state-chartered crypto bank might get access to the Federal Reserve system without submitting to FDIC oversight. Why might crypto entrepreneurs be wary of the FDIC? It traces back to Operation Choke Point. Some in the crypto space believe that the recent attempts to ringfence the crypto industry and cut off its connectivity to the banking system are reminiscent of this little-known Obama-era program. Beginning in 2013, Choke Point was a scheme which sought to marginalize specific industries operating legally — not through lawmaking, but by applying pressure via the banking sector. The Obama DoJ had already cut its teeth with its successful effort to sideline the online poker space in 2011 and 2012 with threats issued to banks supporting poker companies. With Choke Point, the Department decided to scale up its efforts and target other industries, starting with uncontroversial targets like payday lenders. Then, the DoJ coordinated with the FDIC and OCC to pressure member banks to “redline” — determine as too risky to do business with — certain legal but politically disfavored sectors, chief among them firearms manufacturers and adult entertainment 2 . Banks and payment processors internalized this guidance, and even after the program was formally shuttered under Trump in 2017, its shadow lingered. Today, banks simply ascribe a higher risk to activities that they suspect might draw the government’s ire, even if no specific guidance exists. Since Choke Point nominally ended, using financial rails as an extra-judicial political cudgel has only become more popular. Under pressure, a number of banks walked away from the Dakota Access Pipeline in 2017. In 2018, Bank of America and Citigroup deplatformed firearms companies, and BoA began to report client firearm purchases to the federal government. In 2019, AOC announced her intent to marginalize private prisons through her seat on the House Financial Services Committee. Financial regulators are being asked to advance progressive causes, too. In 2021, the Democratic House passed the “Federal Reserve Racial and Economic Equity Act,” which would have required the Fed to aim to “eliminate disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit.” Gensler’s SEC now maintains a controversial climate agenda, as does the Fed (at smaller scale). Kamala Harris has deputized banks to advance a racial equity agenda, effectively imposing uneven demographic standards for credit provision. Today it’s even commonplace for explicitly conservative organizations like Gab or Parler, and various malcontents and dissidents who fall afoul of regime politics, to find themselves deplatformed from banks, fintech, and payment processors that they rely on to do business. For those who support this, I would invite you to imagine what financial inclusion (or exclusion) under a similarly zealous DeSantis administration might look like. “Just build your own bank,” right? Well, not if the Fed has anything to say about it. As evident with the stillborn Wyoming SPDI, the crypto industry tried that path and was utterly stymied. Banks are highly regulated public-private partnerships in an environment where new charters are excruciatingly hard to obtain, and as such remain de facto arms of the state. It has been and remains trivial to deputize them to carry out political objectives. If there was any doubt, it’s now evident that the Obama administration and its successor in Biden’s regime are comfortable circumventing the First Amendment by engaging nominally private companies to do their dirty work. Anyone paying remote attention would have noticed the oddly close revolving door between monopolistic big tech firms and Obama/ Biden security state officials. And ever since Elon Musk leaked the Twitter Files, it’s nakedly clear that the US government and its security apparatus used proxies at Twitter for overt censorship and narrative control. Twitter is “just a private company,” though, right? In 2017, Trump and Republican lawmakers like Rep. Luetkemeyer were able to put a stop to Choke Point for a time, but it didn’t last. One of the first moves from Biden’s OCC was to undo Brian Brook’s Fair Access rule that prohibited political discrimination in banking. Biden’s deputies picked up where Obama’s regulators had left off. And now, after the time it took to digest Biden’s Executive Orders, regulators are tightening the screw. Today, the outlook for banks remotely interested in crypto is precarious. Bankers tell me that crypto is toxic and the risks of engaging with the asset class aren’t worth it. In the wake of the Custodia decision, obtaining a new charter for a crypto bank looks extremely unlikely. Banking innovations at the state level, like Wyoming’s SPDI for crypto banks, appear dead in the water. Federal Charters for crypto firms with the OCC also look dead in the water. Traders, liquid funds, and businesses with crypto working capital are nervously examining their stablecoin portfolios and fiat access points, wondering if bank connectivity might be severed with little notice. Privately, entrepreneurs and CEOs in crypto tell me that they sense a regulatory noose tightening. As crypto-facing banks ‘derisk,’ younger and smaller firms will struggle to get banking, taking us back to the 2014 to 2016 period when fiat access for crypto businesses was at an extreme premium. Exchanges and other businesses that rely on fiat onramps are concerned that their few remaining bank partners will shut them off or institute draconian standards for scrutiny. As a venture capitalist operating at the early stage, I am directly witnessing the chilling effects of this policy in action. Founders are reckoning with new uncertainties around whether they’ll be able to operate their businesses at all. So why the push by bank regulators now? The FTX collapse and its ensuing effects, particularly on Silvergate, provides much of the answer. Financial regulators weren’t interested in FTX while the fraud was underway (with the exception of the SEC and its chairman Gensler, who had oddly close ties to the organization), but ever since the exchange failed in spectacular fashion, they are now contemplating ways to avoid the next such collapse. FTX as an offshore exchange was not directly supervised by financial regulators (aside from FTX US, which was a marginal stub), so it was outside of their direct aegis. However, regulators believe that they might have a silver bullet in the fiat on- and off-ramps on which the industry relies. If they can choke off fiat access, they can marginalize the industry — on and off shore — without regulating it directly. In some key respects, Crypto Choke Point 2.0 differs from the original. It appears that the administration has learned from the efforts of its predecessors. In Choke Point 1.0, guidance was mainly informal and involved backdoor, off-the-record conversations. Its main tool was the threat of investigation from the DoJ and FDIC if financial institutions didn’t internalize the administration’s risk standards. Because this was patently unconstitutional, it gave Republicans the collateral to ultimately repeal the program. In 2.0, everything is happening in plain sight, in the form of rulemaking, written guidance, and blogs. The current crypto crackdown is being sold as a “safety and soundness” issue for banks, and not merely a reputational risk issue. Jake Chervinsky of the Blockchain Association calls it “regulation by blog post.” No need to ask Congress for new laws if federal regulators can simply make policy (and in the case of the Fed, grow their scope and mandate) by publishing guidance which dissuades banks from doing business with crypto. Custodia’s Caitlin Long calls the Fed denial of her application “shooting the stallion to scatter the herd.” As a consequence, the only banks willing to touch crypto at this point are smaller, less risk-averse ones, with more to gain from banking the industry. However, this means that crypto deposits and flows end up being substantial relative to their core business, which introduces concentration risks. Banks prefer not to have excessive exposure to single counterparties, or a depository base that is highly correlated in its flows. Silvergate felt this acutely with the bank run it suffered — and survived — post FTX. While it’s impressive that they were able to honor a 70% drawdown in their depository base, that episode will dissuade any banks looking to serve crypto clients that might face the same. And practically speaking, labeling crypto-facing banks “high risk” has four direct effects: it gives them a higher premium with the FDIC, they face a lower cap rate with the Fed (which inhibits their ability to overdraw), they face restrictions on other business activities, and management risks a poor examination score with their regulatory supervisors, which inhibits their ability to do M&A. So while some analysts like Wilson Sonsini’s Jess Cheng have pointed out, somewhat optimistically, that banks are not explicitly barred from providing crypto custody or onboarding crypto clients, they still stand to get labeled high risk — and face serious business hurdles as a result. Some might be sympathetic to regulators’ attempts to insulate the banking system from the vicissitudes of the crypto space. But thus far, crypto’s various disasters haven’t produced any meaningful contagion. The industry had a full-blown credit crisis in 2022, with virtually every major lender going bankrupt, but the damage was contained. The worst fallout in the banking space was suffered by Silvergate, which suffered an $8b drawdown, but survived. No onshore, fiat-backed stablecoin suffered any meaningful adverse effects, despite the massive crypto selloff in 2021 and 2022. They functioned as intended. And no contagion spilled into traditional finance via mass selling of Treasuries, something officials have historically felt might be a key transmission channel. As Biden enters the second half of his term, his crackdown on crypto banking has deflated hopes for a regulatory rapprochement in the US. Many crypto entrepreneurs now tell me that they’re waiting for 2025 and a putative DeSantis regime for things to turn. Some can’t wait that long, and are shuttering their plans for businesses which involve any type of regulatory approval, especially with regards to bank charters. Regulators are effectively picking winners — with larger, more established crypto firms able to hang on to their bank relationships, while newer ones are shut out. Meanwhile, other jurisdictions are making a bid for their business. Hong Kong has adopted a friendlier tone once again, as has the UK. The UAE and the Saudis are looking to attract crypto firms. And US regulators can scarcely afford to forget what happened with FTX, in which they curtailed the business activities of onshore exchanges, effectively pushing US individuals into the waiting claws of SBF. If bank regulators continue their pressure campaign, they risk not only losing control of the crypto industry, but ironically increasing risk, by pushing activity to less sophisticated jurisdictions, less able to manage genuine risks that may emerge. -Nic Carter Author’s note: Thanks to Austin Campbell for his feedback on this story. Image: Public domain 1 If you’re wondering how using a stablecoin on-chain is substantively different from a bank letting clients withdraw cash from an ATM and using it to buy something from someone else, you’re not alone. 2 The FDIC at one point listed 30 different industries for banks to avoid.
Logo nic carter @nic__carter technology brother Isle of Yap niccarter.info Joined November 2011 Tweets 50,485 Following 3,031 Followers 348,241 Likes 193,991 3,097 Photos and videos Tweets Tweets & Replies Media Search nic carter @nic__carter 6h getting a lot of inbound "are you worried about x or y" -- everything I thought was salient went in the article. there's still a ton I don't know. I'm not being a doomer I'm just reporting things I'm seeing/ppl are telling me. 11 5 107 nic carter @nic__carter 5h hearing good things on the PoR front though! 2 2 1 48 nic carter @nic__carter 4h a depositor goes to the bank and withdraws $5k in cash. they spend it on a peer to peer basis with no KYC/AML. ✅✅perfectly legal a bank issues a stablecoin. a user converts fiat to stables, and transacts it on chain on a peer to peer basis. ❌❌ BANNED in the US 35 46 8 404 nic carter @nic__carter 4h this is the most mind boggling feature of new bank regs being rolled out (detailed below). the Fed would like us to believe that there's an inherent disanalogy between digital bearers (stables) and physical bearers (cash). but there isnt. theyre the same. piratewires.com/p/crypto-cho… Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs detailing the Biden Admin's coordinated, ongoing effort across virtually every US financial regulator to deny crypto firms access to banking services piratewires.com 13 23 6 172 nic carter @nic__carter 4h Also, regarding one of the points I make at the end (that regulators are weirdly terrified stablecoin outflows might crash treasury markets) -- some supporting analysis crypto-wanderer.medium.com/s… Stablecoin Liquidation Or, Would it Crash The Financial System? crypto-wanderer.medium.com 4 7 1 69 nic carter @nic__carter 2h And if you want to dig deeper into the Custodia denial or the Fed policy statement I recommend this piece by Linda Jeng for the @crypto_council cryptoforinnovation.org/what… What Could Recent Banking Agencies’ Statements Mean for Crypto? Strongly worded policy statements from banking agencies present a worrying prospect for the financial ecosystem. cryptoforinnovation.org 1 1 30 nic carter @nic__carter 2h Shut the hell up loser Zhu Su 🔺 @zhusu 4h 1/ june/july was total darkness for me, kyle & our creditors after our bet on accelerating crypto adoption proved fatally wrong we were crushed by the collapse of the market & the way our misplaced conviction had contributed to the pain Show this thread 18 18 302 nic carter @nic__carter 2h This dude is living out SBFs fantasy of “making it all back” in one harebrained scheme - the trade being tricking his own creditors to custody their claims with him so he can retire them 1 3 71 nic carter @nic__carter 5h America had the means, motive, and opportunity to destroy Nordstream. Biden also threatened publicly to do it. No other candidate fits the bill. seymourhersh.substack.com/p/… How America Took Out The Nord Stream Pipeline The New York Times called it a “mystery,” but the United States executed a covert sea operation that was kept secret—until now seymourhersh.substack.com 17 15 2 144 nic carter @nic__carter 5h Seymour Hersh is a pulizer winning journalist who broke the story about the my lai massacre btw. 15 1 47 nic carter retweeted Mike Solana @micsolana 20h the biden administration is quietly trying to ban crypto. @nic__carter breaks it down in an explosive new guest post for pirate wires. piratewires.com/p/crypto-cho… Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs detailing the Biden Admin's coordinated, ongoing effort across virtually every US financial regulator to deny crypto firms access to banking services piratewires.com 124 461 103 1,672 nic carter @nic__carter Feb 8 The nocoiners found this, it would be a shame if you went through the QRTs and bullied them. Don’t do it!! nic carter @nic__carter Feb 7 I don't want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut of its connectivity to the banking system - and it's working Show this thread 6 1 1 50 nic carter @nic__carter Feb 7 I don't want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut of its connectivity to the banking system - and it's working 343 423 147 2,264 nic carter @nic__carter Feb 7 piece with a summary of what's going on coming soon. tether and offshore havens / more pro-crypto jurisdictions will be winners here. US will consider to be a loser. 24 32 1 466 nic carter @nic__carter Feb 8 Summarised everything in an article out 🔜 ™️ 7 1 1 87 nic carter retweeted Jeff Roberts @jeffjohnroberts Feb 8 Are the banking agencies working with the White House to kill crypto? @nic__carter may be right about a new Operation Chokepoint Must read from @leomschwartz about the machinations at the OCC in today's Fortune Crypto newsletter fortune.com/crypto/2023/02/0… With crypto banking on the brink, rumors are flying An obscure government office is at the center of uncertainty for two key companies. fortune.com 10 21 2 98 nic carter retweeted Data Always @Data_Always Feb 8 Spending to inscribe Ordinals is climbing every day. Still only 12% of total fees and 0.3% of the subsidy, but the rise remains exponential. Biggest mempool backlog since FTX and 3AC collapses. 9 43 19 246 Show this thread nic carter @nic__carter Feb 7 Current bitcoin fundamentalist doctrine: P2p payments, no matter how small, are absolutely sacred, especially if they occur in the global south Bundles of arbitrary data changing hands, no matter how economically significant, are absolutely haram 24 6 3 147 nic carter @nic__carter Feb 7 Credit to those in the former camp who have a heterodox view, seeing many coming around. But there are many who see non monetary uses as absolute profane. No one tell them that satoshi endorsed them! 8 2 55 nic carter retweeted Jake Chervinsky @jchervinsky Feb 7 This is accurate. Without new legislation from Congress, federal agencies lack the authority to comprehensively regulate crypto markets, so their fallback position is to weaponize control over the banking system to mandate discrimination against crypto companies. This must stop. nic carter @nic__carter Feb 7 I don't want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut of its connectivity to the banking system - and it's working Show this thread 24 197 19 783 Show this thread nic carter @nic__carter Feb 7 Good thread / post on exporting a lot of your mental computation and storage to a 3rd party database, interfaced via LLM LeveredVlad.eth (aka GPTvlad) @leveredvlad Feb 7 1/ Have you ever wondered what life would be like if you could unlock your brain's full potential like in the movie Limitless? What if I told you that this is possible now with AI? Let me explain. A thread 🧵 Hint: this is not about ChatGPT 👀 Show this thread 1 1 33 nic carter @nic__carter Feb 7 eventually our brains will be 'thin interfaces' or the client in the client server architecture. we will outsource most of the work to non-brain data lakes. do you bother to learn the layout of a new city now that google maps exists? 7 30 Load more
https://crypto-wanderer.medium.com/stablecoin-liquidation-60ea7c834a78 Austin Campbell Austin Campbell Feb 9 · 6 min read · Stablecoin Liquidation Or, Would it Crash the Financial System? Photo by Christoffer Engström on Unsplash Recently, the Federal Reserve had some things to say about crypto, the White House had some things to say about crypto, and then many of those things made their way into the Federal Register about crypto. Among many other topics, the concerns raised by these regulators touch on one of my favorite things in crypto and something I’ve been thinking about and…
https://cryptoforinnovation.org/timeline/ https://fortune.com/crypto/2023/02/08/with-crypto-banking-on-the-brink-rumor... https://onezero.medium.com/why-decentralization-matters-5e3f79f7638e https://www.coincenter.org/open-matters-why-permissionless-blockchains-are-e... https://www.thedrum.com/news/2022/11/15/googles-400m-penalty-the-impact-the-... https://www.csoonline.com/article/2130877/the-biggest-data-breaches-of-the-2... https://cryptoforinnovation.org/what-recent-banking-agencies-statements-coul... https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230103a... https://www.federalreserve.gov/newsevents/pressreleases/orders20230127a.htm What Could Recent Banking Agencies’ Statements Mean for Crypto? byLinda Jeng February 4, 2023 in News Analysis Red flag laws in the UK and US helped warn people that cars were coming. Not so long ago, our city streets were primarily dirt roads, for pedestrians, pushcart vendors, and horse-drawn carriages. Then came the car. As more people drove cars in the 1920s, accidents and deaths skyrocketed. Local governments responded, creating laws to police this novel activity. And yet it’s hard now to imagine anything else. In the United States we now, for better or worse, primarily view streets as a place for cars and sidewalks as a place for pedestrians. Back in the 1920s, cities like New York, Philadelphia, and Chicago treated cars as dangerous intruders. In Chicago in 1926, as in most cities, “nothing” in the law would “prohibit a pedestrian from using any part of the roadway of any street or highway, at any time or at any place as he may desire.” Battles were waged in these cities’ courts, legislative halls and in the public “courts”, the newspapers. In New York City’s traffic court in 1923, a judge explained that “Nobody has any inherent right to run an automobile at all.” How did legislators respond? In the UK, and in states like Vermont, “red flag laws” required someone to walk in front of the vehicle carrying a red flag, to warn everyone of its impending arrival. The back and forth may have been dramatic, but it was also consequential. Ultimately, the automotive industry and its consumers made their case, the cars ruled the roads – a revolution in transport was made safer through improvements in technology as well as in law, and a dramatically new way of ordering things became the accepted norm for generations. We are at a similar crossroads today with the transformation of money and assets, and their overall implications for the financial services sector and society at large. The rise of the internet and advances in modern computing power have led to the creation of blockchain and other types of distributed ledger technologies. They have also led to the unbundling of financial services and fintech firms finding innovative ways to disintermediate, providing services and tokenizing assets along the financial services stacks. Make no mistake, this is a revolution. This revolution also comes with risks. Last year, we saw some of the worst hacks and scams in crypto history. According to Chainalysis, consumers lost $3 billion to crypto hacks, including the Wormhole Crypto Bridge, Axie Infinity and the most high profile of all – the bankruptcy of FTX. Following the events of last year, we have seen a series of strongly-worded policy statements from US federal banking agencies released in recent weeks: 1. US Banking Agencies’ Joint Statement on Crypto-asset risks to banking organizations 2. Federal Reserve Board’s denial of application by Custodia Bank, Inc. to become a member of the Federal Reserve System 3. Federal Reserve Board’s policy statement to promote a level playing field for all banks with a federal supervisor, regardless of deposit insurance status Worrying prospects for the future of finance It is not hard to hear echoes from initial responses to the revolution in transportation. Together, these policy statements present a worrying prospect for the financial ecosystem for a number of reasons. First, the Joint Statement could be viewed as a warning to banks not to support the crypto industry, which will effectively de-bank the crypto industry and drive it to the shadows. Second, the Fed’s policy statement sets out a “rebuttable presumption” under section 9(13) of the Federal Reserve Act that state member banks, regardless of deposit insurance status, are limited to activities permissible for national banks. This presumption can be rebutted if there is a “clear and compelling rationale” for the Fed to deviate in regulatory treatment among federally supervised banks and state banks. The Fed goes on to state that it “has not yet been presented with facts and circumstances that warrant rebutting its presumption.” The Fed then explains why national banks (and therefore state banks) are not currently permitted to engage in crypto-asset activities. The Fed’s main argument is that there is no federal statute or rule that expressly permits either national banks or state banks to hold most crypto-assets. But this reasoning is simply arbitrary. Congress passed the Federal Reserve Act in 1913 – the same year Henry Ford began mass producing automobiles. The National Bank Act was signed into effect by President Lincoln in 1863 – long before the advent of the computer, internet and crypto. Needless to say, it would be unrealistic to expect legislative drafters to include express permissions of crypto activities, but Hollywood has portrayed President Lincoln as a time traveler – so who knows! The Fed is not waving a red flag in front of a moving automobile, it is building a brick wall. Furthermore, this policy stance further segregates crypto finance from traditional finance, dangerously bifurcating our financial system as it continues to grow and transform. This could lead to distortions in market integrity and efficiencies. We may end up with part of the economy transacting in Fed-sanctioned US dollars while the other part transacts in non-USD digital assets outside the governance and monitoring of the Fed. As this shadow economy grows, the Fed loses more and more of its ability to effect effective monetary policies and economic stability. Finally, this leads us to the Fed’s denial of Custodia Bank’s application for a master account with the Federal Reserve System, and thereby denying it access to the Federal Reserve System. A number of reasons were raised by the Fed as to why Custodia’s application was “inconsistent with the required factors under the law”: Custodia does not have federal deposit insurance Custodia proposed to engage in novel and untested crypto activities that include crypto-assets on open, public and/or decentralized networks The Fed then proceeds to conclude that these inconsistent factors presented “significant safety and soundness risks.” The Fed also found that “Custodia’s risk management framework was insufficient to address the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks.” Let’s examine each alleged inconsistent factor. No FDIC insurance For a bank to be eligible for the Fed’s lender of last resort protections, it must be insured by the FDIC. But Custodia was applying only for a Fed master account, which does not require FDIC insurance. The Fed provided no explanation as to why it required federal deposit insurance of Custodia. More importantly, would deposit insurance be needed if the bank is 100% backed by highly liquid assets and does not make loans, as Custodia was proposing? In the early 1930s, Congress debated how to deal with bank runs.There were two options, 100% liquid reserves (narrow banking) or deposit insurance (fractional reserve banking). Congress chose deposit insurance, allowing banks to continue to lend out their deposits. However, if a bank is fully backed by highly liquid assets and does not engage in maturity transformation, then deposit insurance would be entirely unnecessary. Novel and untested crypto activities Custodia proposed to be a crypto custody bank that could issue fiat-backed stablecoins backed by deposits (ie, narrow banking). What is novel about Custodia’s business proposal is that lending was not an important part of its business model. This means the riskiest part of banking – credit intermediation – did not exist. Custodia was proposing to be a utility bank – one that holds deposits to be tokenized in fiat-backed stablecoins and custodies crypto-assets for customers. Both lines of business are far less risky than credit intermediation. Open, public and/or decentralized networks The Fed presumes that open, permissionless blockchains are a risk factor without explaining why. The internet is an open and public network upon which information travels freely. As explained by Chris Dixon in his blog, developers building on closed, centrally-controlled platforms can risk having the platforms unilaterally change their rules. As a society, we give up rights over our personal data and expose ourselves to security breaches on such centralized platforms. Open-source, permissionless networks are more transparent, have fewer information asymmetries and operate via more democratic governance. They allow for a virtual cycle in blockchain innovation. Open, public decentralized networks facilitate innovative and collaborative uses for the network, which leads to greater user access and user demand, which in turn contributes to improvements to the public network and then more innovation in the network. The Internet is an obvious example. As Peter Van Valkenburgh explains, “anyone can design, build, and utilize hardware or software that will automatically connect to the Internet without seeking permission from a network gatekeeper, a national government, or a competitor.” Risk management system I cannot comment on Custodia’s risk management system without a deeper dive into its architecture and risk controls. But it should be noted that a new generation of crypto-native banks will be more innovative and tech-savvy and can take advantage of the myriad new technologies available for identifying illicit financial activities. Finally, Fed Chair Jerome Powell remarked that if the Fed had approved Custodia, then the Fed would be flooded with similar bank applications, and then who would do the lending? Chair Powell’s fear is not listed as one of the reasons why Custodia’s application was denied, but it sounds like it may be an underlying cause. It seems premature to deny Custodia’s application on an unfounded fear that there would be a tidal wave of narrow bank applications. Other central banks are experimenting with crypto activities themselves*. Mainstream commercial banks are also entering the chat.** I commend these institutions for their efforts to engage with crypto technologies. Ultimately, chilling innovation harms not only private sector innovation but public sector innovation as well. Instead, at a minimum, the Fed could allow a pilot of a few narrow banks and see how they fare. The opportunity to engage collaboratively could allow for education on both sides, while widening the aperture of innovation in the United States. We now look back on the “Red Flag Laws” of the early 1900s as quaint and amusing. Let’s hope our children can afford to feel the same way when they look back at US agencies’ fear of embracing the technological developments transforming money and assets in 2023. * Other central banks are experimenting with crypto activities themselves. Project Dunbar, led by the BIS Innovation Hub in partnership with the Reserve Bank of Australia, Central Bank of Malaysia, Monetary Authority of Singapore, and South African Reserve Bank, is testing the use of central bank digital currencies for improving international settlement. Another example is Project Mariana, a joint project between the Switzerland, Singapore, and Eurosystem BIS Innovation Hub Centres, the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank, is exploring the use of DeFi for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs between financial institutions to settle foreign exchange trades in financial markets. **Mainstream commercial banks are getting into the fray as well. The New York Fed and the Regulated Liability Network (RLN) banks are exploring how to use bank deposits to tokenize money. The RLN includes Citi, BNY Mellon, Wells Fargo, HSBC and Mastercard are among the participants. Another project is Project Guardian – a collaborative initiative with the financial industry that seeks to test the feasibility of applications in asset tokenization and DeFi while managing risks to financial stability and integrity. DBS, JP Morgan and SBI Digital Asset Holdings explored how they were able to launch the first industry pilot where the banks conducted foreign exchange and government bond transactions against liquidity pools comprising of tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD) on public blockchain networks.
https://www.sec.gov/news/statement/peirce-statement-kraken-020923 https://www.yahoo.com/finance/news/fidelity-schwab-citadel-create-crypto-130... Brian Armstrong @brian_armstrong 3h We will keep fighting for economic freedom (our mission at Coinbase). Some days being the most trusted brand in crypto means protecting our customers from government overreach. 603 770 101 6,082 Brian Armstrong @brian_armstrong 7h Well said. There was no way to register (a disingenuous offer). “Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.” Hester Peirce @HesterPeirce 7h My thoughts on today's Kraken settlement: sec.gov/news/statement/peirc… 130 297 13 1,968 Brian Armstrong @brian_armstrong Feb 8 1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen. 1,601 3,646 1,386 14,029 Brian Armstrong @brian_armstrong Feb 8 2/ Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints. 133 273 50 3,593 Brian Armstrong @brian_armstrong Feb 8 3/ Staking is not a security. Here’s a good primer: paradigm.xyz/2022/10/ethereu… Ethereum's New ‘Staking’ Model Does Not Make ETH A Security. - Paradigm 1. Introduction In the wake of Ethereum’s transition to a proof-of-stake consensus mechanism (“the Merge”), various commentators have suggested that Ethereum’s new staking model could result in its... paradigm.xyz 47 295 27 2,996 Brian Armstrong @brian_armstrong Feb 8 4/ We need to make sure that new technologies are encouraged to grow in the US, and not stifled by lack of clear rules. When it comes to financial services and web3, it's a matter of national security that these capabilities be built out in the U.S. 41 256 34 3,402 Brian Armstrong @brian_armstrong Feb 8 5/ Regulation by enforcement doesn’t work. It encourages companies to operate offshore, which is what happened with FTX. 72 279 41 3,482 Brian Armstrong @brian_armstrong Feb 8 6/ Hopefully we can work together to publish clear rules for the industry, and come up with sensible solutions that protect consumers while preserving innovation and national security interests in the U.S.
" Localcryptos shut down in November and 2 months later now Localbitcoins. Really wondering if this is pure coincidence or there's an unknown factor causing this.. " https://www.reddit.com/r/Bitcoin/comments/10xwjzc/operation_choke_point_20_i... The fiat debt slavery bankers cartel owns your government. They are scared of Bitcoin. SBF was their patsy and gave narrative pretext to do what is now happening. Not only are they seeking to close down all non kyc ramps, they are progressively closing down all ramps. Be prepared for Order 6102B. A ban on private custody of Bitcoin is closer every day.
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