US authorities use crisis to stifle crypto access to banks
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“It is quite clear that there has been a decision across the banking regulatory agencies in this [Biden] administration that crypto itself is risky and needs to be released from the banking system,” Brian Brooks, the former acting head of the Office of the Comptroller of the Currency (OCC), told CoinDesk TV’s “First Mover” on Wednesday.
Last week, Silvergate Bank, a California firm that catered to crypto companies, said it would “voluntarily liquidate” and shut down. Days later, tech startup-focused firm Silicon Valley Bank (SVB), which had some crypto clients, was shut down by the California Department of Financial Protection and Innovation, which said the bank had “lack of liquidity and insolvency.”
Then, over the weekend, New York-based firm Signature Bank, which also had a number of crypto clients, was shut down by New York state banking regulators. The Federal Deposit Insurance Corporation (FDIC) took over SVB and Signature.
When he ran the OCC, “I had a weekly conversation with the FDIC chairman and with the deputy chairman of the [Federal Reserve],” said Brooks, now a member of the board of blockchain company Bitfury. “We talked every week for an hour and talked about what our priorities were for the coming week, how we can support each other, how our actions will affect [banking] system.”
Brooks echoed comments made during the Milken Conference in Washington, DC, earlier this month that the Biden administration is trying to shut down crypto in what he calls Operation Choke Point 2.0, the “biggest story of the next six months.” The original Operation Choke Point was the Obama-era initiative (when Joe Biden was vice president) that investigated banks and the business they did with, among other things, firms believed to be at high risk for fraud and money laundering.
“My belief is [regulators are] trying to send a signal that will eventually suffocate this [crypto] off,” Brooks told CDTV.
Brooks said he is “100% sure regulators worked together” to close the banks, despite the different circumstances.
The New York Department of Financial Services, for example, said on Tuesday Signature Bank was closed not because of crypto, but because of a “crisis of confidence” in the bank’s management. Signature had been working to reduce its exposure to crypto in recent weeks. The California Department of Financial Protection and Innovation said it took over SVB because of its “lack of liquidity and insolvency.” Silvergate voluntarily closed a week after saying it would be late to file its annual report and was unsure about its ability to continue as a “going concern”.
Still, for Brooks, “these things are not accidents at all. I’m very confident of that.”
But crypto won’t be so easily cut off, Brooks said. “There will always be smaller banks willing to step up” and work with crypto companies, he said. But it would “be better if larger banks with better risk management served the sector.”
Read more: President Biden calls for stronger banking regulations in wake of SVB, signature bank collapse
UPDATE (March 15, 2023 18:25 UTC): Brian Brooks sits on the board of Bitfury. He is no longer the CEO.