Warning: Senator Lummis Slams Federal Reserve Crypto Banking Rule Withdrawal

Many in the crypto industry celebrated a recent move by the Federal Reserve, but not everyone is convinced. Get ready to dive into why Senator Cynthia Lummis, a vocal advocate for digital assets, believes the Fed’s withdrawal of certain crypto guidance for banks is “just noise” and not the significant step forward some perceive. This perspective is crucial for anyone tracking the complex landscape of crypto banking and its interaction with US financial regulators.

Understanding the Federal Reserve’s Action

On April 24, the Federal Reserve announced it was withdrawing a supervisory letter from 2022. This letter had previously advised banks to be cautious or even avoid engaging in activities related to crypto and stablecoins. Many saw this withdrawal as a positive signal, potentially opening the door for traditional banks to interact more freely with digital assets.

However, Senator Lummis views this action with considerable skepticism. While others like Michael Saylor and Anthony Pompliano expressed optimism, Lummis took to social media to voice her concerns, stating the withdrawal was merely “lip service” and not indicative of genuine progress in US crypto policy.

Why Senator Lummis Calls it ‘Not Real Progress’

Senator Lummis outlined several key reasons why she remains unconvinced by the Federal Reserve’s recent move:

• Master Account Issues: She argues the Fed continues to improperly handle master account applications for digital asset companies, hindering their access to the central bank’s payment systems.
• Reputational Risk Reliance: Lummis highlights that the Fed still considers “reputational risk” when supervising banks, a practice criticized for potentially being used to discourage banks from working with crypto firms. This comes as the FDIC is reportedly working to remove this consideration.
• Section 9(13) Policy: A significant point of contention is the Fed’s policy statement in Section 9(13), which has not been withdrawn. This policy continues to label Bitcoin and other digital assets as “unsafe and unsound.”
• Personnel Concerns: Lummis reiterated concerns that staff involved in past actions perceived as targeting the crypto industry (like “Operation Chokepoint 2.0”) are still influencing policy today.

For Senator Lummis, these points demonstrate that the core regulatory stance hasn’t fundamentally changed, despite the withdrawal of one piece of guidance. She contends that the Fed has actively harmed American innovation by stifling businesses in the digital asset space.

Differing Views on Crypto Regulation

The reaction to the Fed’s announcement underscores the diverse perspectives within the industry and government regarding crypto regulation.

On one side, figures like Michael Saylor see the withdrawal as a green light for banks to engage with Bitcoin. Anastasija Plotnikova of Fideum also believes it simplifies the path for institutional adoption.

On the other side, Senator Lummis is joined by others like Caitlin Long, founder of Custodia Bank (a crypto-native bank that has faced challenges in obtaining a Fed master account), who publicly agreed with Lummis’s assessment that the move was not the breakthrough it appeared to be.

This divergence highlights the ongoing debate about the appropriate level and nature of oversight for digital assets and the institutions that wish to interact with them. While some see incremental positive steps, others see systemic barriers remaining firmly in place.

The Path Forward for US Crypto Policy

Senator Lummis’s strong statement makes it clear that the legislative and regulatory fight for a clear and fair framework for crypto banking is far from over. She vowed to continue holding the Federal Reserve accountable until the digital asset industry receives a “fair shake,” not just minor concessions.

The interplay between legislative efforts (like potential bills from pro-crypto lawmakers) and regulatory actions (from the Fed, FDIC, SEC, etc.) will continue to shape the future of how crypto integrates with the traditional financial system in the United States.

Summary: More Than Just Noise?

While the Federal Reserve’s withdrawal of its 2022 crypto guidance was welcomed by many as a sign of progress for crypto banking, Senator Cynthia Lummis offers a sharp counterpoint. Her detailed critique highlights persistent issues, including master account access, the use of reputational risk, and standing policies that label digital assets as unsafe. This suggests that despite the regulatory adjustment, significant hurdles remain for banks looking to fully embrace the crypto space. The debate over effective and fair US crypto policy is clearly ongoing, with strong voices on both sides advocating for their vision of the future.