Rep. Emmer accuses the US government of colluding to cut crypto out of the banking industry

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(Kitco News) – Amid growing chatter among the crypto community that the recent struggles experienced by crypto-focused banks are part of a concerted effort by the US government to cut crypto out of the banking industry, a member of Congress is concerned. public.

On Tuesday, Tom Emmer, Majority Whip in the US House of Representatives, sent a letter to Federal Deposit Insurance Corporation (FDIC) head Martin Gruenberg, asking the FDIC chief to answer the question of whether the agency has specifically instructed banks not to offer services to crypto firms.

“Recent reports indicate that federal financial regulators have effectively weaponized their authorities over the past few months to purge legitimate digital assets and opportunities from the United States,” Emmer wrote.

The representative cited the recent comments of former House Financial Services Committee Chairman Barney Frank, co-author of the Dodd-Frank Act, who said during an interview on Monday that the targeted nature of these regulatory efforts is intended to send the message that crypto is toxic and should be avoided.

“If this is the case, these actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer wrote.

Emmer’s letter cited the joint statement released by the Fed, FDIC and the Office of the Comptroller of the Currency in January that discouraged banks from holding crypto or servicing crypto clients, the Fed’s public statement issued in February that “apparently made this perspective final” without a public comment period and the Biden administration’s “Roadmap to Mitigate Cryptocurrencies’s Risks” as further evidence of a coordinated effort to harm the industry.

“In less than a week, regulatory pronouncement-driven market fears led to mass withdrawals at the few remaining banks that provide legitimate crypto firms with access to financial services,” Emmer said. “The administration’s demonstrated effort to strangle digital assets from the US financial system is a lazy and destructive regulatory strategy that stagnates innovation and exposes US users of digital assets to less sophisticated regulatory jurisdictions.”

Emmer added that while Congress is focused on working across the aisle to develop nonpartisan legislative solutions for the crypto community, “Reports indicate that this administration may be driven by a political agenda that has already hurt everyday Americans.”

The congressman has called on the FDIC to officially answer whether it has instructed banks under its supervision not to provide banking services to crypto firms, and if so, explain the analysis for that instruction and “the goal of the instruction if not to discourage banks from servicing digital assets.”

Emmer also wants the FDIC to indicate whether it has explicitly or implicitly communicated with any banks that “their supervision will be more onerous in any way if they take on new (or maintain existing) digital asset clients.”

The Majority Whip emphasized that the real culprit behind the recent banking crisis is the Federal Reserve and wants to know how the FDIC has helped banks cope with the consequences of rising interest rates.

“There have been claims that these bank closures occurred because crypto is ‘risky’, when in reality these institutions appear to have been affected less by the volatility of digital assets and more by the unprecedented interest rate hikes we’ve witnessed over the past twelve months ,” he said. “What, if any, guidance has the FDIC provided to financial institutions to help them manage and mitigate the risk of rising interest rates?”

Emmer asks Gruenberg and the FDIC to answer these questions no later than 17.00 March 24.

The banking battles for the crypto industry escalated last Wednesday when crypto-focused Silvergate Bank announced it would wind down operations. Silicon Valley Bank met its demise just two days later after an overnight surge in deposits saw $41 billion in cash leave the bank’s balance sheet.

Over the weekend, the government announced it was taking over Signature Bank in a bid to avoid a deepening of the banking contagion, prompting Barney Frank’s comments.

On Tuesday, the New York State Department of Financial Services pushed back against Frank’s comments, saying the decision to close Signature Bank had “nothing to do with crypto” and was instead related to “a significant crisis of confidence in the bank’s leadership” that occurred over the weekend after regulators shut down Silicon Valley Bank.