Crypto Is on Thin Ice With Regulators
Bloomberg Businessweek US|February 20 - 27, 2023 (Double Issue)
After the FTX scandal, digital-asset platforms face tough questions and wary banks
Crypto Is on Thin Ice With Regulators

For years crypto seemed to escape strict regulation in the US. Those days may be ending. US watchdogs’ aggressive posture since the collapse of crypto exchange FTX could push the industry to the fringes of finance.

“The regulators are effectively building a wall between crypto trading and the banking and the securities markets to prevent the types of systemic vulnerabilities that led to the 2008 financial crisis,” says Todd Baker, senior fellow at Columbia University’s Richman Center for Business, Law & Public Policy. 

US officials deny that there’s some broad effort to crush crypto and say they want innovation that plays by the rules. But interviews with more than a dozen current and former regulators, industry executives and lobbyists paint a picture of a wide-ranging crackdown. Many requested anonymity to discuss the situation candidly.

Banks are getting the message that they should back away from many crypto endeavors. The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. on Jan. 3 issued a blunt declaration that said crypto-related risks that can’t be controlled shouldn’t be allowed to migrate to the banking system. “I’ve talked to banking executives and crypto CEOs, and they’re telling me there’s a highly coordinated move under way to try to ring-fence crypto, to cut it offfrom traditional finance,” says Nic Carter, general partner at Castle Island Ventures, which invests in crypto-related businesses.

This story is from the February 20 - 27, 2023 (Double Issue) edition of Bloomberg Businessweek US.

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This story is from the February 20 - 27, 2023 (Double Issue) edition of Bloomberg Businessweek US.

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