A New “Operation Choke Point”? The Quickly Constricting Rules on Crypto Activities for Banks
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In the lead article of The Banking Law Journal's May 2023 issue, White & Case partner Douglas Landy, counsel Glen Cuccinello and associates Leel Sinai and Chante Eliaszadeh examine a joint statement by federal bank regulators regarding whether banks can continue to provide banking services to the crypto industry, as well as whether they can continue to engage in related activities themselves.
In the piece, the authors review the "Joint Statement on Liquidity Risks to Banking Operations Resulting from Crypto-Asset Market Vulnerabilities" issued by the Federal Reserve, the Office of the Comptroller of Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to determine whether the banking industry is entering a new "Operation Choke Point", in which banks are discouraged or precluded from providing banking services to legal cryptocurrency industries.
The article notes, "The Agencies' actions, complemented by the Administration's continuous research and statements on the risks of crypto-asset business activities for banking institutions, leave a trail of indications as to what the banking industry is likely to see in the year ahead. Such actions denote an effort by the Agencies to consolidate their regulatory posture with regard to such activities in the absence of legislative direction. As a result of such efforts, banks are [now] faced with a limited set of crypto-asset activities in which they may engage, most of which are subject to pre-approval or non-objection by the Agencies."
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