Cryptocurrencies Bitcoin, Ethereum & Co: US Senators Warren and Sanders Call for Withdrawal of Crypto Guidelines for Banks | 27/08/22

• US Senator Warren warns of the risks of crypto trading
• Open letter to OCC
• Bank details requested

US Senator Warren takes a shot at cryptocurrencies

US Senator Elizabeth Warren is definitely not considered a supporter of Bitcoin & Co. Last year, at a meeting of the US Senate Banking Committee, she railed against the cryptocurrency trend. “Cryptocurrencies have created opportunities to defraud investors, support criminals and exacerbate the climate crisis,” Warren said in the Senate session. “The threats posed by cryptocurrencies show that Congress and federal regulators can no longer hide in the hope that crypto will go away. It’s not going to happen. It’s time to tackle these issues head-on.” The politician admitted that the current US banking system definitely needs improvement and excludes numerous US citizens, but cryptocurrencies are not a suitable alternative. She also criticized the high energy consumption that occurs when mining the coins.

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The OCC sets guidelines for banks

Little by little, the digital coins are also coming more and more to the banking system – even if Bitcoin & Co. was originally developed as a modern alternative to the aging banking system. However, the merging of cryptos and banks also requires clear regulation. In several interpretive letters from the Office of the Comptroller of the Currency (OCC) between July 2020 and January 2021, the head of the authority at the time, Brian Brooks, laid down some guidelines for banks when dealing with cryptocurrencies. These include permissions to provide crypto custodian services to customers, hold deposits as reserves for stablecoins, and operate independent verification networks. Brooks, who has been involved with Coinbase along with various banks, is now also CEO of crypto firm BitFury, after being replaced as Comptroller of the Currency by Michael J. Hsu in January 2021. In a November 2021 letter of interpretation, Hsu approved his predecessor’s guidance, “provided the bank can demonstrate to the satisfaction of its regulator that it has controls in place to conduct activities in a safe and sound manner,” it said. For example, “an intended activity cannot be included in ‘banking’ if the bank is unable to carry out the activity in a safe and sound manner.”

requested that the measures be withdrawn

Warren is bothered by these moves, which is why she wrote an open letter to Hsu in early August along with US senators Bernie Sanders, Dick Durbin and Sheldon Whitehouse. “In light of the recent turmoil in the crypto market, we are concerned that the OCC’s actions regarding cryptocurrencies may have exposed the banking system to unnecessary risks and ask that you withdraw existing interpretive letters that have allowed banks to engage in certain crypto activities participate,” said Warren & Co. in the letter.

Risks have not been sufficiently taken into account

Although Hsu had expressed concern that with the agency’s actions, banks are now able to freely pursue their cryptocurrency activities, which lawmakers said is problematic because risks are not adequately addressed in the guidelines. “Cryptocurrencies are highly volatile assets that offer little or no protection to retail investors,” the senators warn. “The crypto market has plummeted in recent months, astonishingly losing around $2 trillion in value since its peak in November 2021, triggering the collapse of several major crypto lenders and firms.”

US senators want details on banks’ crypto deals

In addition to reversing the measures set by Hsu’s predecessor, Brooks, and reaffirming them by Hsu himself, Warren and her colleagues are also asking for details on the banks that have since used the guidelines, and in what form. Just last month, Warren, Whitehouse and their colleagues Markey and Merkley wrote, as well as reps. Huffman and Tlaib, a letter to the U.S. Department of Energy and Environmental Protection Agency that addressed the damage crypto mining is doing to the environment.

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