The crypto industry is facing increased regulatory pressure since the beginning of the year, which has sparked discussion on Twitter about whether the U.S. government is secretly trying to crack down on the entire industry.
The latest piece of the theory’s puzzle comes from Coinbase CEO Brian Armstrong. Writing via Twitter a few hours ago, Armstrong said he had heard rumors that the U.S. Securities and Exchange Commission (SEC) wants to ban retail staking in the United States.
Jake Chervinsky, chief policy officer at the Blockchain Association, confirmed the rumor. “I’ve heard the same rumor and strongly agree with Brian that an attack on staking would be an extreme error in US policy,” the attorney said.
Rumors About A Crypto Crackdown
Just yesterday, it was officially announced that the SEC has launched an investigation into Kraken, one of the largest US exchanges. The reason is the alleged offering of unregistered securities to US customers.
But the attack on the crypto industry goes much deeper. Journalist Nic Carter wrote:
I don’t want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut off its connectivity to the banking system – and it’s working.
Author Samuel Andrew reports that the US central bank and the Office of the Comptroller of the Currency (OCC) are in the midst of a massive crypto-debanking operation. An anonymous source told Andrew, “what is going on is draconian and aimed to kill crypto.”
The analyst explained that the Fed and OCC are even targeting Morgan Stanley and Custodia, as well as crypto-friendly states like Wyoming. Another source told Andrew that Paxos and others were told by the OCC to either withdraw their applications for a banking license or they would be rejected by Friday.
“VC’s are starting to become very, very concerned that their crypto portfolio companies are being de-banked en masse,” Andrew cited another source, continuing, “The OCC is said to produce a paper shortly that is said to be so draconian that a sizable portion of OCC employees may depart.”
Traces Of The US Government
The U.S. government seems to be focusing in particular on the connection of the industry to the banking sector. A supposed goal could be that crypto companies end up completely without a bank connection, so that they do not process deposits and withdrawals in fiat, as Binance recently communicated for US customers (not Binance US). But stablecoins could also run into problems.
There are many signs for this, as Carter wrote. On December 7, Signature Bank announced its intention to cut crypto customer deposits in half. On January 3, the Fed, FDIC, and OCC released a joint statement on security risks for banks dealing with cryptocurrencies.
A few days later, on January 9, Metropolitan Commercial Bank terminated all crypto operations. On January 21, Binance responded to Signature Bank’s policy and decided to only process fiat transactions worth more than $100,000.
On January 27, the Federal Reserve rejected crypto bank Custodia’s two-year application to join the Federal Reserve System and issued a warning for banks to hold crypto assets or issue stablecoins. On the same day, the National Economic Council also issued a policy statement that did not explicitly prohibit banks from serving crypto customers, but strongly advised banks not to do so.
Even in the first week of February, actions continued. The Department of Justice opened an investigation into Silvergate for its dealings with FTX and Alameda. On Tuesday, the Fed had its January 27 statement published in the Federal Register, making the statement a final rule, without Congressional review.
Whether the initiatives will succeed or whether the crypto industry in the U.S. can withstand the pressure remains to be seen. If not, the industry could be forced to go offshore.
At press time, the Bitcoin price stood at $22,711.
Featured image from Lucas Sankey / Unsplash, Chart from TradingView.com