5 crypto developments the banking industry is watching

5 crypto developments bankers are watching

April 18, 2022 4:35 PM

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Conversations around cryptocurrencies are growing in intensity as digital assets move closer to becoming an inseparable part of the national economy.

With the Biden administration recently making its first formal announcement on cryptocurrency in an executive order and the Fed releasing a 40-page report on the potential impact of a U.S. digital dollar, momentum is building quickly.

Here are five key developments that the banking industry has been monitoring carefully.

Proposed crypto bill gets across-the-aisle support

Republican Sen. Cynthia Lummis, a key backer of the crypto-industry, has support from at least one Democrat in a recent push for new legislation on digital assets that would cover issues that include banking, taxes, privacy and consumer protection.

New York Sen. Kirsten Gillibrand, a member of the Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission, says she’s working with Lummis to introduce the new law in the coming weeks.

“The work we’re doing is going to be a very complex and intensive review of different aspects of this industry,” said Gillibrand.

Read more:

Pro-crypto Republican’s push for bill gets backing of a Democrat

Cautious optimism greets Biden’s crypto order

The White House’s first formal announcement on cryptocurrency received a positive reaction from large sections of the finance industry, but as a plan for a plan, the outcome of President Biden’s executive order remains to be seen.

With the Treasury Department and other regulatory bodies now on notice, the time has come for key stakeholders to make their bid to influence the final regulation and policy. Digital assets advocates are looking for regulation to bolster trust, while banks want clear rules of the road.

“To be regulated is to be legitimized,” said Josh Lipsky, a senior director at the Atlantic Council, who previously worked at the International Monetary Fund and the Obama White House. “So, it’s a question of who will be on what side of that, and what those regulations will look like.”

Read more:

What’s next after Biden’s crypto order?

Democrat-led draft legislation seeks to detail stablecoin rules

House Financial Services Committee member Rep. Josh Gotthiemer, D-N.J., is leading an initiative by Congressional Democrats to draw up legislation for the first federal rules and practical safeguards governing stablecoins.

While the draft legislation has not been released officially, its provisions include limitations on which institutions can issue stablecoins and the creation of an insurance fund overseen by the FDIC that would cover losses by nonbank stablecoin issuers.

Read more:

Democrats circulate bill to rein in stablecoins

Concerns raised that crypto will be used to circumvent sanctions

Sens. Elizabeth Warren, D-Mass., Mark Warner, D-Va., Sherrod Brown, D-Ohio, and Jack Reed, D-R.I., have expressed fears that Russian banks and oligarchs will attempt to evade the world’s increasingly stringent economic sanctions by using cryptocurrencies.

In a letter to Treasury Secretary Janet Yellen, the senators asked the Treasury Department to ensure the cryptocurrency industry complies with sanctions and prevents the use of “digital assets and alternative payment platforms as a new means to hide cross-border transactions for nefarious purposes.”

As it is well known that digital assets can be used to bypass the traditional financial system, it seems likely that sanctioned bodies are already trying to use crypto to avoid being penalized by the restrictions. But can they be stopped?

Read more:

Could Russian banks and oligarchs use crypto to evade sanctions?