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Donald Verrilli Accuses Federal Agencies of Intentionally Targeting Crypto Firms

Published July 5, 2024 2:37 PM
Teuta Franjkovic
Published July 5, 2024 2:37 PM
By Teuta Franjkovic
Verified by Insha Zia

Key Takeaways

  • Donald Verrilli brought in-depth experience in navigating US cryptocurrency regulation challenges.
  • Verrilli highlighted the OCC’s increasing efforts to limit banks’ involvement with digital assets, reflecting growing regulatory scrutiny within traditional banking frameworks.
  • The analysis emphasized the ongoing legal battles aimed at electing crypto-friendly lawmakers.

In recent years, the United States government has waged a relentless campaign against the cryptocurrency industry, which has been marked by a series of stringent regulatory actions.

Lawmakers in the US are now challenging the current administration, particularly the Federal Reserve by supporting Custodia Bank and, by extension, the broader crypto market. Their efforts are underscored by insights from experts such as former Solicitor General Paul Clement and the latest being Solicitor General from the Obama Aministration, Donald B. Verrilli.

Verrilli Says Fed’s Denial of Custodia Master Account Highlights Industry “Debanking”

In a recent report,  Donald Verrilli criticized the current administration’s efforts to restrict banks’ engagement with the crypto sector. He underscored the extensive challenges financial institutions face when engaging with digital assets.

According to  Verrilli:

“Despite the digital asset industry’s pressing need for banking services, federal regulators have waged a concerted, coordinated campaign to debank the industry.”

Verrilli pointed out the US administration is actively working to prevent banks from working with digital assets and highlighted this issue as central to a recent complaint filed against the FDIC by a Coinbase affiliate, noting that it is a well-recognized problem in the financial industry. He stated that the efforts to limit banks’ involvement with digital assets have been intensifying over the years.

The former Solicitor General specifically alluded to the Office of the Comptroller of the Currency’s (OCC) Interpretive Letter 1172 , published on September 21, 2020, which set the stage for how banks could interact with digital assets.

According to Verrilli’s report, the latest guidance from the OCC Interpretive Letter changes earlier directives. It scales back permissions that previously allowed regulated entities to offer cryptocurrency custody services, hold dollar deposits for stablecoins, act as nodes in digital asset networks, issue stablecoins, and exchange stablecoins for fiat currency.

The lawmaker highlighted the increasingly restrictive environment banks like Custodia Bank now face. Under the new guidance, banks involved with digital assets must navigate unnecessary hurdles, such as notifying the OCC and obtaining permissions.

Verrilli & Clement Deconstruct OCC’s Crypto Guidance for Banks

Although the initial decision in the ongoing legal battle has favored the Federal Reserve, Verrilli contends the case is far from over. The former Solicitor General suggested that the OCC could play a significant role in the proceedings. In a joint communication with Paul Clement, former Solicitor General under President Bush, the lawmakers highlighted that the regulatory conditions imposed are particularly challenging for an industry that is rapidly evolving and innovating.

The involvement of both legal experts in discussing the intricacies of crypto regulation indicates a shift in the political landscape surrounding this issue. Fox Business journalist Eleanor Terrett, who reported on Verrilli and Clement’s perspectives, noted their past disagreements in Supreme Court cases, emphasizing the significance of their current alignment on the complexities of cryptocurrency regulation.

Cryptocurrency Having a D.C. Moment

It is evident Crypto has become a uniting topic in Washington, D.C., garnering support from both Democrats and Republicans. This was recently seen in the Senate, which voted to overturn the SEC’s Staff Accounting Bulletin 121 (SAB-121), legislation that imposed strict accounting standards on cryptocurrency assets held by financial institutions. The decision came after the House had approved the same pro-crypto measure. However, the momentum was halted when US President Joe Biden vetoed the House Joint Resolution to repeal SAB 121.

Although Biden intervened with SAB-121, the US President chose not to veto the “Financial Innovation and Technology for the 21st Century Act,” known as FIT 21– a regulatory framework designed to provide robust, time-tested consumer protections. FIT21 also provides much-needed regulatory certainty for digital asset innovation to flourish in the United States.

In addition to lawmakers, there have also been a rise in political campaigns, notably funded by Coinbase, to appointed crypto-friendly politicians as the industry becomes a pressing issue for voters in the US.

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