Coinbase has urged top US banking regulators to clarify that banks can provide crypto-related services.
The company sent a letter to the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) requesting policy changes. This move comes as concerns over crypto debanking gain momentum in Washington.
Coinbase Challenges Regulatory Barriers
Coinbase contacted regulators to receive verification that banks should be able to handle cryptocurrency execution services together with custody responsibilities.
The company demands that the OCC update its interpretive letter because it establishes illegal roadblocks in bank operations. According to Coinbase, the interpretive letter presents an unapproved evaluation process that violates the Administrative Procedure Act by lacking proper rulemaking.
Coinbase demanded that both the Federal Reserve and FDIC institutions provide assurance that state-chartered banks can offer crypto services.
The company demands that all present restrictions be removed because they hinder bank involvement with the crypto industry. The legal assessment that Coinbase submitted to the regulators included three major law firms supporting its position.
HDIC, along with the OCC and Fed, have yet to provide any formal answer regarding Coinbase’s business proposal.
The FDIC maintains a policy against releasing information about letters it receives, so the agency abstained from making any statement regarding the letter. U.S. regulatory uncertainty about crypto partnerships has generated confusion among banking organizations about their partnership strategies.
Crypto Debanking Sparks Political Tensions
Republican lawmakers have focused their attention on the problem of debanking in the crypto sector. Congress members have escalated their concerns regarding regulators who they believe intentionally place restrictions on banks that want to serve crypto firms.
Members of the legislative branch contend that such policy choices endanger market ingenuity and threaten to push the industry from American borders.
The topic will receive congressional attention through two hearings that took place during this week.
The Senate Banking Committee will discuss debanking matters on Wednesday, followed by the House Financial Services Committee’s hearing about the issue on Thursday. Paul Grewal serves as the Chief Legal Officer of Coinbase and will appear as a witness in front of the House Financial Services Committee.
The crypto exchange Coinbase took legal action against the FDIC because the banking regulator forced institutions to discontinue their services to digital currency firms.
The company states that hostile regulations have created problems for crypto companies that need banking services. Major financial institutions remain concerned about possible regulatory oversight, which leads them to hesitate when serving clients interested in cryptocurrency.
Uncertain Future for Crypto Banking Policies
The situation regarding crypto debanking policies faces uncertainty because regulatory authorities are undergoing new changes.
The newly appointed acting chair at FDIC is Travis Hill, under the new government leadership. Hill previously mentioned that the agency needs to offer better instructions for banks regarding their engagement with crypto firms.
During a recent interview, Federal Reserve Chair Jerome Powell acknowledged that banks can provide services to crypto clients when they effectively manage associated risks.
Financial institutions avoid cryptocurrency services due to concerns about anti-money laundering laws. The investment bank TD Cowen reports that banks intend to restrict their crypto investments because these risks continue to exist.
Coinbase works with the crypto industry to show regulators the ongoing battle for regulatory clarity in the crypto space.
The organization strives to achieve distinct guidelines that permit banking institutions to work with crypto businesses. The result of congressional hearings combined with regulatory choices will establish the future conditions of crypto banking operations in the United States.
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