One of the first resolutions for next year issued by American authorities is to tighten their grip on cryptocurrencies. This comes as a potential new $900 million scandal rocks the industry.
As a new scandal shakes the crypto planet, for the first time three US agencies, the Federal Reserve (the central bank), the FDIC (the agency that guarantees bank deposits) and the OCC (the Treasury agency that regulates banks established in the United States) has issued a joint press release warning banks that they will be more scrutinized regarding their cryptocurrency portfolio.
As a new scandal shakes the crypto planet, for the first time three US agencies, the Federal Reserve (the central bank), the FDIC (the agency that guarantees bank deposits) and the OCC (the Treasury agency that regulates banks established in the United States) have issued a joint statement warning banks that they will be more scrutinized with regards to their crypto asset portfolio. The scandal is that of the crypto investment platform Gemini which had subcontracted its loan business to the Genesis company which belongs to Barry Silbert’s DCG group. In mid-November, following the collapse of FTX, Genesis suspended indefinitely the possibility of withdrawal from 340,000 customers. Genesis owes Gemini $900 million. But again, Gemini is now accusing Barry Silbert of embezzling his clients’ funds for the benefit of DCG Group. Earlier this year, Gemini issued an open letter recalling this litigation, noting that Genesis declines any negotiations, and asking Genesis to publish a progress report on its finances before January 8. further element that encourages three US regulatory agencies to react and issue a joint press release that mainly concerns the risks of instability that cryptocurrencies could pose to the traditional banking sector. The trio reminds banks “they must engage in thorough discussions with their supervisory authorities on existing crypto-related proposals and activities” and “that before starting any activity related to crypto-assets, they must ensure that an activity can be carried out in a secure manner, that it is legally permitted, that it complies with applicable laws and regulations and that it can take place in a fair way towards consumers”. underline the lack of solidity and maturity of this market, the risks of fraud and money laundering and warn that they will strengthen their controls. With a coup de grace: “Based on their current understanding and experience to date, the agencies believe that the issuance or proprietary holding of crypto-assets issued, stored or transferred over an open, public or decentralized network, or similar system, is most likely incompatible with safe and sound banking practices”. In summary, crypto assets are not considered trustworthy and banks should not hold them for their own account. Even the US authorities are putting their money on the line, as they have just concluded a transaction with the Coinbase platform which is fined 100 million dollars from New York State justice for being lax on anti-money laundering laws.