regulators

US Bank collapse — Is crypto being targeted?

The latest episode of Decentralize with Cointelegraph unpacks whether U.S. regulators are targeting the crypto ecosystem through the closure of SVB and Signature Bank.

Crypto-friendly banks in the United States, such as Signature Bank, served the likes of Paxos Trust, Celsius Network and other major crypto firms now suffering due to the recent decisions taken by the Federal Deposit Insurance Corporation (FDIC) and New York State Department of Financial Services.

Silicon Valley Bank (SVB) reportedly handled over $5 billion of funds for a handful of cryptocurrency venture capital funds, including Andreessen Horowitz, Paradigm and Pantera Capital, in recent years.

USD Coin (USDC) issuer Circle was directly affected by the closure of SVB, with $3.3 billion tied up in the bank after its closure. Cryptocurrency markets were directly affected, with USDC temporarily losing its peg to the U.S. dollar for several days.

Several high-profile commentators in the U.S. have suggested that there is mounting pressure on banks to stop serving cryptocurrency-related businesses. Meanwhile, a spokesperson from the FDIC has refuted claims that the future sale of Signature Bank would not require divestment of crypto activities.

Cointelegraph business editor Sam Bourgi and journalist Gareth Jenkinson break down the major talking points from the U.S. banking collapse fiasco and discuss whether regulators are targeting the cryptocurrency industry nationwide.

The closure of major U.S. banks by regulatory institutions has been a significant talking point this week, with several high-profile cryptocurrency firms hamstrung by decisions taken in America.

Check out Decentralize with Cointelegraph and other podcasts from Cointelegraph — including Crypto Trading Secrets, Hashing It Out, The Agenda and NFT Steez — on Apple Podcasts, Spotify, Google Podcasts or TuneIn.

US lawmaker blames ‘billionaire crypto bros’ for delayed legislation

The collapse of FTX has raised alarm bells across Washington, D.C.

United States congressman Brad Sherman, a known crypto skeptic, has pointed the finger at “billionaire crypto bros” for slowing down much-needed cryptocurrency regulation.

In a Nov. 13 statement addressing the collapse of crypto exchange FTX, Sherman said the exchange’s implosion has demonstrated the need for regulators to take immediate and aggressive action:

“The sudden collapse this week of one of the largest cryptocurrency firms in the world has been a dramatic demonstration of both the inherent risks of digital assets and the critical weaknesses in the industry that has grown up around them.”

“For years I have advocated for Congress and federal regulators to take an aggressive approach in confronting the many threats to our society posed by cryptocurrencies,” he added.

Sherman announced his plans to work with his Congress colleagues to examine options for federal legislation, which he hopes can be carried out without the financial influence of members in the cryptocurrency industry:

“To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective.”

“I believe it is important now more than ever that the SEC take decisive action to put an end to the regulatory gray area in which the crypto industry has operated,” the senator added.

While Sherman made a direct reference to former FTX CEO Sam Bankman-Fried and political donations to the Democratic Party, he also mentioned Ryan Salame, the co-CEO of FTX, who donated to Republicans in 2022.

Bankman-Fried was also reported to have donated $39.8 million into the recent 2022 U.S. midterm election, which he said was distributed to both the Democratic and Republican parties. The nearly $40 million figure made him the sixth largest contributor.

While Sherman has advocated for an “aggressive approach” to crypto regulation, Thomas Hook, a Professor on Cryptocurrency Regulation at Boston University School of Law recently told Cointelegraph that regulators should be looking to implement “common sense regulation:”

“[Regulators] are reacting to an industry that is evolving constantly but overregulation could stifle that innovation […] poorly thought-out regulation could create a two-fold issue: first it could limit US consumers’ ability to participate in the cryptocurrency ecosystem and it could also drive these businesses to less regulated jurisdictions.”

“This actually creates more risk for customers as it puts them in a position of dealing with less regulated institutions to participate in the ecosystem,” he added.

His comments, however, were made before the collapse of the FTX crypto exchange. Cointelegraph has reached out to Hook to understand if his position has changed in light of the new events.

Meanwhile, Shark Tank host and millionaire venture capitalist Kevin O’Leary stated in a Nov. 11 interview with CNBC that U.S. regulators “need to start with one thing” rather than regulating everything at once — with the investor recommending Congress start with the Stablecoin Transparency Act.

O’Leary said that given the recent events at FTX, he believes institutional investors will likely put a pause on deploying “serious capital” into new investments until a legitimate regulatory framework is set in place:

“That would signal to everybody around the world that regulators in the United States are taking crypto on, starting to put rules in place, putting the guard rails on, no one is going to play ball in this space on an institutional level with serious capital until we get it done.”

Among the most notable cryptocurrency bills to have been introduced into U.S. Congress include the Central Bank Digital Currency Study Act of 2021, the Digital Commodities Consumer Protection Act of 2022 (DCCPA), the Stablecoin Transparency Act and the Cryptocurrency Tax Clarity Act.

Future bills will center around President Joe Biden’s executive order in March 2022 — which will include bills aimed at improving consumer and investor protection, promoting financial stability, countering illicit finance and improving the United States’ standing in the global financial system, financial inclusion and responsible innovation.

Coinbase expands to Australia with focus on institutions in ‘months to come’

With an expanded Australian offering, Coinbase’s vice president of international and business development said the exchange faced “tough questions” from regulators and policymakers about its services.

United States-based cryptocurrency exchange Coinbase will expand its services in Australia, launching a local entity and an updated suite of services for retail crypto traders, hinting that institutional products are soon to follow.

Speaking to Cointelegraph, Nana Murugesan, Coinbase’s vice president of international and business development, said building during bear markets has “paid off big time during the bull run” and that he’s confident in what he sees in the local market.

The “baseline signals” Murugesan explains, such as the local awareness of crypto and people who view it as the future of finance, are “kind of on par or even better” in Australia compared to the United States and other markets:

“Australia definitely punches way, way over its weight in the APAC region, certainly at a global level too. And from a revenue contribution standpoint, I feel pretty good about what it’s going to do.”

Murugesan explained that it started with building a localized infrastructure, incorporating a local entity (Coinbase Australia Pty Ltd) and obtaining registration to provide digital currency exchange services with the Australian Transaction Reports and Analysis Centre, the country’s financial intelligence agency.

“We’ve been very impressed with the open door that we’ve received in Canberra and with different policymakers,” Murugesan said, adding the exchange has received “tough questions” regarding its platform and token listings:

“Given the token mapping exercise that’s going on, there are a lot of technical questions that we are getting from the Treasury and other departments. […] Deep technical questions is another thing that we are seeing in Australia at a level deeper than some other countries.”

Initially, Coinbase is providing Australian crypto traders with new “fast payments” for local bank accounts, access to its advanced trading platform and 24/7 chat support, which Murugesan sai “opens the door” for the company to launch its full range of institutional and development products.

While he didn’t have a specific timeline on when the products will become available, Murugesan added that he knows Australian institutions will want to “do everything locally” and added that Coinbase will be “very much focused on institutions” in the coming months.

The exchange will also collaborate with RMIT University’s Blockchain Innovation Hub to assess Web3 opportunities in the country. Murugesan added that it’s working with the University of New South Wales and others to create related courses and assist in research programs.

Murugesan said th as Coinbase looks to further expand into Asia, he sees regulation as a business enabler as “resources are limited, especially during a bear market.”

With some countries in the region having unclear crypto policies, it’s likely it will focus “more towards markets that have clarity or are going towards clarity,” he said.

He mentioned the high level of interest G20 nations have in crypto and how blockchain and digital currencies fit into the future of finance, expecting it to be a “hot topic” among G20 member nations by next year, adding:

“There’s a lot of interest among Australian policymakers to take a leadership role in those type of discussions, too.”