The crypto industry has faced heightened regulatory scrutiny since the start of the year, which has prompted a heated debate on Twitter about whether the US government is attempting to clamp down on the sector as a whole.
The latest piece of this theory was shared by Brian Armstrong, CEO of Coinbase, who took to Twitter a few hours ago to reveal that he had heard whispers that the US Securities and Exchange Commission (SEC) is seeking to prohibit retail staking in the country.
1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.
— Brian Armstrong (@brian_armstrong) February 8, 2023
Jake Chervinsky, Chief Policy Officer at the Blockchain Association, confirmed the rumor and expressed his agreement with Armstrong’s viewpoint. Chervinsky stated, “I have also heard the same rumor and wholeheartedly concur with Brian that targeting staking would be a major misstep in US policy.”
According to the analyst, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) are not only focusing on Morgan Stanley and Custodia, but also on crypto-friendly states such as Wyoming. Another source informed Andrew that Paxos and other companies were told by the OCC to either withdraw their banking license applications or face rejection by Friday.
Andrew also mentioned that venture capitalists are becoming increasingly worried about the mass de-banking of their crypto portfolio companies. He quoted another source as saying, “The OCC is rumored to release a paper soon that is expected to be so strict that a significant number of OCC employees may choose to leave.”
The Federal Reserve’s stance on the crypto industry became even clearer in the following weeks. On January 27, the Fed rejected the two-year application of crypto bank Custodia to join the Federal Reserve System and issued a warning to banks to avoid holding crypto assets or issuing stablecoins.
On the same day, the National Economic Council released a policy statement that didn’t explicitly ban banks from serving crypto customers, but strongly discouraged them from doing so.
The pressure on the crypto industry continued even in the first week of February, as the Department of Justice launched an investigation into Silvergate for its connections with FTX and Alameda. On Tuesday, the Fed’s January 27 statement was published in the Federal Register, making the statement a final rule that couldn’t be reviewed by Congress.
The outcome of these initiatives and the ability of the US crypto industry to withstand the pressure remain uncertain. If the industry fails to do so, it may be forced to relocate offshore.
Joy Rice is a computer science graduate and crypto writer with a strong understanding of blockchain technology. She writes about the latest developments in the crypto industry, and is passionate about educating and informing readers about the potential uses of blockchain.