Crypto is not getting a new US rulebook

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It’s safe to call it — Crypto is not going to get special treatment from Congress anytime soon. Regulators are now filling the void, sending hints that they think the old rules for finance are working just fine.

Thursday joint crypto policy statement from the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency underscored the new dynamic.

The agencies warned the banks that they — can you believe it? — should think twice about accepting deposits from crypto startups. Regulators care because deposits are a critical source of funding for banks. Smart crypto customers and potentially unstable stablecoin reserves pose a risk to this funding.

The statement sent a new, overt signal — just like previous warnings the agencies have issued in recent weeks — but the message was rooted in existing policy. Old rules in a fresh package.

“It’s important to note that the agencies emphasize that there is nothing new in this statement,” Karen Petrou, managing partner at Federal Financial Analytics, told MM. “Translation: If a bank has experienced crypto-related funding risk, enforcement action under old rules has stood and is on its way.”

That’s exactly how the Senate bank manager is Sherrod Brown – an outspoken crypto critic – wants it to be. He called it a victory.

“This is the right step to bring more clarity to banking organizations and protect people’s hard-earned money as we continue to consider a comprehensive digital asset regulatory framework,” the Ohio Democrat said in a statement.

It’s unclear how much energy Brown will devote to crypto legislation in his roomwhich may include questions about not only bank regulators, but also difficult questions surrounding the role of the SEC.

It’s also unclear how lawmakers like Brown and Sen. Elizabeth Warren (D-Mass.) — who also sees little use for digital currency — would ever align with innovation-loving Republicans like House Financial Services Chair Patrick McHenry (RN.C.) and Majority Whip Tom Emmer.

“I don’t know if the Overton window of these people overlaps at all on crypto,” DeFi Education Fund policy director Miller Whitehouse-Levine told MM.

So Thursday’s warning from banking regulators — not to mention rolling enforcement actions from other agencies — is likely the closest the crypto community will get to U.S. policy toward the industry for the foreseeable future. And it’s not welcoming.

As BTIG director of policy research Isaac Boltansky pointed out to MM, regulators were relieved at how well the traditional banking system fared in the face of the crypto winter. Why shake things up?

“Everything at the end of last year — from FTX to crypto’s market cap falling out of bed — emboldened crypto opponents and bent the arc of regulatory response toward the more restrictive end of the spectrum,” he said. “We’ve seen in real time that the view of crypto among prudent regulators has shifted from caution to somewhere between structural skepticism and outright disdain.”

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