Here’s why this doesn’t directly affect Bitcoin, Ethereum, and other cryptos

As regulators around the world wake up to the crypto mania, more and more space-related companies are facing obstacles to their businesses. Along with China’s full crackdown, top exchanges around the world are facing bans while authorities in the US target various protocols and financial institutions.

The Federal Reserve Bank even recently proposed guidelines to outline the system the central bank will use to assess applications for access to the agency’s financial services. Caitlin Long, CEO of Avanti Bank, held these guidelines in part for crypto, even if the ecosystem was not directly mentioned. In a series of tweets, she called this the beginning of the regulatory crackdown on crypto.

1 / THREAD ABT REGULATORY NEWS in #crypto, which I’ve been following on Twitter since April. It appears that the raid has started. I don’t know how it will turn out but:
* it doesn’t directly affect #BTC #ETH, etc. Base layers will continue to add blocks
* It affects intermediaries and US $ access points

– Caitlin Long (@CaitlinLong_) July 13, 2021

The Wall Street veteran shared her thoughts on the country’s regulatory environment, saying that while Bitcoin, Ethereum and other crypto assets may not be directly affected, authorities would prefer to go after “intermediaries” and “entry points” for US -Dollars to look for the sector.

“The problem isn’t Bitcoin, Ethereum, or any other crypto-protocol, they’re fine. The risk arises from the operational processes of the banks. “

She went on to say that a “key event” occurred on July 13th that may have been missed by many as the comment deadline for the Federal Reserve’s proposed guidelines on access to payment systems expired. There are several reasons why she believes access to the Fed’s direct payments system is important.

She also noted that July 13 marked the “key event” ending the comment deadline for the Federal Reserve’s proposed payment system access guidelines, arguing that the Fed’s guidelines were in part aimed at cryptocurrencies, although the asset class was not directly was mentioned.

Several crypto-related bank accounts saw bulk closings by American banks in 2017. Long stated that it doesn’t matter if these companies were fraudulent or legitimate, and such a risk of being faced with debanking again is very real for crypto companies. Even the leading exchange Coinbase had reiterated these fears in its prospectus.

“Unfortunately, long-term banking relationships were often THE decisive factor in whether a start-up made it … It is a matter of course for our industry that law-abiding companies receive direct US dollar access on their own.”

In addition, a forced separation between banking and crypto service does more harm than good, as it creates additional risks. Most crypto companies today receive banking transactions not through the Fed, but indirectly through offshore Eurodollar banks or through multilayer fintech-to-fintech-to-bank agreements.

This adds fees to payments, the CEO said, while the Fed is unable to monitor latent risks to the payment system. You can read Avanti’s extensive comment on the subjects of the draft law here.

Last October, Avanti in Wyoming received a banking charter that allows it to run the crypto-friendly bank in the state. Long was instrumental in announcing the Special Purpose Depository Institutions (SPDIs) in Wyoming, which will classify digital securities as digital assets. Avanti and Kraken are SPDIs who put them on an equal footing with the state’s traditional banks.

Even Ripple’s XRP, which has been weighed down by an SEC lawsuit for months, is said to have the ability to survive in the state, where it is tracked not as collateral but as an asset.

It is to be hoped that the proposed guidelines will not hinder this progress and allow these institutions to work in an inclusive manner.

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