• Federal banking regulators are using their power to prevent crypto from entering the US banking system.
• The Federal Reserve rejected a crypto bank’s membership application and other agencies have turned down crypto firms trying to link with the traditional financial system.
• The Biden administration has warned against allowing mainstream institutions to invest in cryptocurrency markets, deepening ties between cryptocurrencies and the broader financial system.
Crypto’s Banking Problem
Cryptocurrency cannot become what many of its proponents want it to be without banks, but U.S. regulators are pushing it out of banking, preventing it from entering the U.S. banking system with their expansive powers.
FRB Rejects Crypto Bank’s Application
The Federal Reserve Board (FRB) recently rejected a crypto-focused Custodia Bank’s application for membership, indicating that federal regulators are working together on policy to keep digital assets away from the traditional financial system. This decision came shortly after the Biden administration cautioned against mainstream institutions investing in cryptocurrency markets, which would deepen ties between cryptocurrencies and the broader financial system.
FRSB Denies Master Account
To further reinforce this stance, the Federal Reserve Bank of Kansas City denied Custodia’s long-pending application for a master account shortly after FRB’s rejection of their membership application. This decision was followed by rumors about more crackdowns on crypto banking operations in order to discourage any kind of relation between cryptocurrencies and finance institutions in USA .
Potential Impact on Crypto Markets
These regulatory measures could have an impact on not just custodial services for institutional investors but also retail investors investing directly into digital assets as these regulations could limit access to credit cards and other banking services essential for purchasing tokens or coins securely via exchanges or wallets..
What Does The Future Hold?
It remains unclear what new restrictions may come as part of future regulatory actions around cryptocurrency services like wallets or trading platforms as well as how this will affect banks offering similar services in other countries partnering with US based companies. As such, it is important that both industry players and regulators focus on finding ways to enable responsible innovation while ensuring consumer protection laws are adhered to when it comes to digital assets and crypto related activities