Interest in crypto remains high despite suspicions of government crackdown on crypto banking

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(Kitco News) – As the crypto market consolidates after its best January since 2013, rumors have begun to swirl that the US government has a secret plot to destroy the crypto industry via its regulatory power over banking.

CoinMetrics co-founder Nic Carter brought the conversation into the public realm in a guest post for PirateWires, claiming that the US government is using the banking sector to carry out a widespread and systematic attack against the crypto industry. Carter referred to the ongoing moves by the government as “Operation Choke Point 2.0.”

“Specifically, the Biden administration is now executing what appears to be a coordinated, multi-agency plan to discourage banks from dealing with crypto firms,” ​​Carter said.

While there is ample evidence to support Carter’s claims, such as Signature Bank halting USD transfers of less than $100,000 from Binance, or the shutdown of the crypto unit of Metropolitan Commercial Bank, the government’s efforts may be too little, too late as many in the industry now sees crypto as inevitable.

Included in that crowd is Michael Demissie, the head of digital assets at Bank of New York Mellon (BNY Mellon), who remains steadfast in his belief that institutional interest in digital assets will remain high despite the struggles the industry faces in 2022.

Speaking on a cryptocurrency panel at Afore Consulting’s 7th Annual FinTech and Regulatory Conference on Wednesday, Demissie argued that the digital asset industry is “here to stay” as institutional investors take a strong interest in crypto.

His position is supported by the results of a study conducted by the bank in 2022 which showed that 91% of custodian bank customers are interested in investing in blockchain-based tokenized products. In addition, the survey found that 86% of institutional players use a “buy and hold” strategy, suggesting that they have a positive view of the long-term outlook for the asset class.

Seventy percent of the bank’s customers also said they would increase their digital asset activity if services such as custody and execution became available from recognized, trusted institutions. And 88% of the bank’s customers said they would go ahead with their plans despite the market crash in 2022.

“What we’re seeing is that clients are certainly interested in digital assets, in general,” Demissie said, according to a Reuters report.

BNY Mellon’s head of digital assets also highlighted the need for more regulatory clarity from Washington, which would allow industry players to move forward with their crypto plans with less uncertainty.

“We absolutely need clear rules and regulations of the road. We need responsible players who can provide reliable services that live up to the investor’s trust,” he said, adding: “It is important that we navigate this area responsibly.”

During a Q4 earnings call held in January, BNY Mellon CEO Robin Vince said the bank remains dedicated to advancing its long-term growth initiatives, which include digital assets.

“We went live with our digital asset custody platform in the US in October. […] This will continue to be a focus for us, not so much for crypto, but really the broader opportunity that exists across digital assets and distributed ledger technology,” Vince said. “If anything, recent events in the crypto market only underscore the need for reliable regulated providers in the digital asset space.”

The CEO went on to acknowledge that cryptocurrencies are unlikely to become a major source of income for the bank in the near future, and instead urged those on the move to focus on the long-term outlook.

“Especially for digital assets, there’s the long-term play out of some of the things we talked about,” Vince said. “I expect it will be negligible from a revenue standpoint over the next couple of years. It could be negligible for the next five years.”

According to Vince, ignoring digital assets “would be like being a depository 50 years ago and sticking to paper and not adopting a computer,” adding, “It’s not going to be us.”

BNY Mellon, America’s oldest investment bank and the world’s largest custodian bank, revealed in October that it was launching crypto custody services to enable customers to hold their cryptocurrency holdings alongside their traditional investments on the same platform – becoming the first major US bank to do so . so.

The bank was able to do this after it was granted approval for a Fed main account, prompting a lawsuit and allegations of favoritism by Wyoming-based Custodia Bank, whose application for a Fed main account has been pending since October 2022.

BNY Mellon is the first of the eight systemically important US banks to store digital currencies and allow customers to use one custody platform for both traditional and crypto holdings.

Goldman Sachs has also expressed interest in buying crypto firms in the wake of the devastation caused by the bankruptcy of FTX and has partnered with index provider MSCI and crypto data firm Coin Metrics to develop a crypto rating service.