Fed’s WARNING To Banks!! What It Means For CRYPTO!!

The second stage of the U.S crypto Crackdown could be about to begin that's Because the Federal Reserve recently put Out a warning to Banks working with Crypto projects and companies Particularly stable coins now the last Time this happened was back in January And in the months that followed half a Dozen crypto projects companies and Banks were targeted by regulators and a Major stablecoin lost its Peg So today We're going to give you a bit of Background about the ongoing crypto Crackdown summarized the fed's recent Warnings to crypto-friendly Banks and Tell you what it could all mean for the Crypto Market Let's start with a bit of background if You watched our first video about the US's crypto Crackdown you'll know it's Believed to have begun in January this Year when the fed and other banking Regulators put out a warning to Financial institutions working with Crypto In the months that followed crypto Exchanges such as binance started losing Access to banking services Regulators Started targeting stablecoin issuers Such as paxos and ratings agencies Started downgrading crypto friendly Banks such as silvergate which went down Under questionable circumstances And during the banking crisis in March

Regulators shut down signature another Crypto-friendly bank again under Questionable circumstances meanwhile the Collapse of Silicon Valley Bank caused Circles usdc stablecoin to D Peg which Caused chaos in the crypto markets Especially D5 now if you watched our Subsequent video about The Man Behind The crypto Crackdown you'll note that Fed Vice chair for supervision Michael Barr is the big bad wolf of this Tale in That video we showed how he used the Crypto friendly bank failures as proof That crypto especially stable coins Needs more regulation you'll also know That Michael had made it clear that the Fed and its allies would continue to use Regulation by enforcement to address Stable coins until Congress passes Actual regulations and Michael even Created a new crypto team to address These quote unregulated state coins at The same time the FED announced that it Would be launching its fed now fast Payment system in July if you watched Our video about fednow you'll know that It's a precursor to a central bank Digital currency or cbdc you'll also Know we've speculated about stable coins Being competitors to Fed now Circumstantial evidence for this was Revealed in June when fed chairman Jerome Powell said that the Central Bank Sees stable coins as a form of money now

In theory this was bullish but in Practice it was the opposite that's Because it's the central bank's job to Manage money not a stable coin issuers Stronger circumstantial evidence of Stable coins being competitors to Fed Now emerged in July when it was revealed That authorities had raided deltec Bank In the Bahamas Now for context deltek is one of the Banks believed to be used by usdt issuer Tether tens of millions of dollars were Reportedly seized note though that it's Not known whether these accounts were Related to tether or any other crypto Entities To put things into perspective this raid On deltek took place just two days Before the launch of fed now This could just be a coincidence and it Probably is what's harder to explain However is the urgency with which Pro-crypto politicians have been trying To push through stablecoin regulations As I mentioned a few moments ago Michael Said that the fed and its allies would Continue to use regulation by Enforcement until Congress passes crypto Regulations the urgency surrounding Recent stablecoin regulations could Therefore be a sign that more Enforcement is coming down the pipe this Enforcement may not necessarily come From the FED either some of you may have

Heard about a problematic provision in The U.S defense Bill the tldr is that it Could require stablecoin issuers to Collect kyc from all stablecoin holders And users not just the entities who mint And redeem stable coins put simply if The U.S defense bill passes as it's Currently written you could be required To complete kyc to use any stable coins You hold in your personal wallet Obviously this is not guaranteed to Happen but it's just one of many Stablecoin related regulatory concerns That have emerged over the last few Months All of these concerns pale in comparison To the latest addition to the pile However and that's the fed's Announcement that it will be increasing Its oversight of crypto-friendly banks This announcement came just 24 hours After PayPal had announced the launch of Its own stablecoin probably just another Coincidence Speculation aside the fed's announcement Specified that it was a de facto part 2 To a similar announcement it had made Back in January this January Announcement consisted of two documents A memo and a policy statement In principle the memo and policy Statement were supposed to quote level The playing field for banks interacting With crypto companies and projects in

Reality leveling the playing field Basically meant restricting smaller Banks from having more access to crypto Than bigger Banks namely State Banks the Memo noted that State Banks overseen by The FED would face restrictions on Crypto Holdings and would also have to Effectively seek approval from banking Regulators before issuing US dollar Stable coins it's not clear what the Memo meant by issuing but this Presumably meant minting a stablecoin This would explain why the FDIC alleged That cross Riverbank had engaged in Quote unsafe lending practices shortly After it partnered with circle for usdc Minting and redeeming on that note the FDIC recently put out a report of its Own warning of the quote novel and Complex risks of crypto to Banks as for The policy statement meanwhile it noted That it would be modifying its Interpretation of existing banking Regulations so that they apply to crypto Related activities Now this sounds pretty boring but is Extremely significant because applying Tread fire regulations to crypto runs The risk of turning crypto into Trad Fire so to speak thankfully the policy Statement explains the relevant banking Regulations in plain English quote under Section 913 of the act the Federal Reserve board May limit the activities

Of a state member bank and its Subsidiaries to those activities that Are permissible for a National Bank in a Manner consistent with section 24 of the Federal Deposit Insurance Act fdia Section 24 of the fdia generally Prohibits insured State Banks from Engaging as principal in any activity That is not permissible for National Banks unless authorized by federal Statute or the FDIC again this would Explain the cross Riverbank warning The policy statement continues by Explaining how it would apply these Banking regulations to certain crypto Activities it starts by saying that Banks are technically allowed to custody Crypto although it is discouraged However they are not allowed to hold Crypto as assets on their balance sheets Regarding stable coins meanwhile the Policy statement reiterates that Banks Must effectively seek approval from Banking Regulators before issuing stable Coins but like the custody of crypto the Policy statement seems to discourage Banks from even trying to do anything With stable coins consider the following Quote The board generally believes that Issuing tokens on open public and or Decentralized networks or similar Systems is highly likely to be Inconsistent with safe and sound banking

Practices translation sure you can work With stable coins but it's not safe or Sound so it's better that you don't Moreover quote the board believes such Risks are pronounced where the issuing Bank does not have the capability to Obtain and verify the identity of all Transacting parties including for those Using unhosted wallets This pertains directly to the kyc Provision in the defense act that we Discussed earlier but of course that's Probably just another coincidence Anyways this ties in to the fed's recent Announcement from earlier this month Like the January announcement the August Announcement consisted of two documents The difference is that one detailed the Creation of a new supervision program And the other is specific to stable Coins the document detailing the Creation of a new supervision program Starts with a disclaimer quote This letter applies to all banking Organizations supervised by the Federal Reserve including those with 10 billion Dollars or less in Consolidated Assets In other words it essentially applies to Every Bank in the United States The authors explain that the purpose of The program is to enhance the Supervision of quote novel activities Including crypto related activities the Objective is to mitigate the risks

Associated with these activities hence Why it takes a risk-based approach the Author specify that they will focus on Four novel activities Non-banks that provide banking services Crypto related activities including Stable coins any Bank projects that use Distributed Ledger technology and banks That provide a lot of services for Crypto companies and projects I.E crypto Friendly Banks the authors highlight the Fact that no new supervisory processes Will be created for these four novel Activities rather they'll be supervised Like all other activities based on risk Put differently same risk same Regulation the aforementioned principle That could turn crypto into another arm Of Trout fight What's scary is that the author's node Quote the Federal Reserve will notify in Writing those supervised banking Organizations whose novel activities Will be subject to examination through The program no U.S bank has received This notification at the time of Shooting this video at least not to our Knowledge For what it's worth the authors also Note that quote banking organizations Are neither prohibited nor discouraged From providing banking services to Customers of any specific class or type As permitted by law or regulation as

We've seen though the FED clearly wants Banks to stop working with crypto now This relates to the second document Which details the reporting process that Banks must go through if they want to Engage in any stablecoin related Activities it applies to all U.S banks And it builds directly on the banking Regulation from the January announcement Which we discussed earlier here the FED Clarifies that stablecoin related Activities includes quote issuing Holding or transacting in dollar tokens To facilitate payments This wording is more important than you Might think because there's a huge Difference between payment stablecoin And non-payment stablecoin regulation at Least in the US if you watched our video About the stablecoin hearing from Earlier this year you'll know that Payment stable coins are supposed to be Regulated by the FED whereas non-payment Stable coins are supposed to be Regulated by the SEC like money market Funds at least according to The Regulators some stablecoin issuers Notably Circle have argued that their Stable coins are not Securities because They're used primarily for payments now Logically this protects them from an SEC Crackdown but simultaneously puts them In the fed's sniper scope which isn't All that better in our opinion then

Again Circle has been explicit about its Intentions to be regulated by the fed And its CEO Jeremy alaire tacitly Admitted in an interview that the end Game is to convert usdc into a cbdc for Now though circle is trying to become Regulated by the FED without causing a Crackdown in the process talk about Walking a tightrope Regardless the key takeaway is that the Fed's oversight of stablecoin related Activities only relates to those Considered to be payment stable coins In any case the authors go on to note That any bank that wants to engage in Stablecoin related activities must Notify its respective fed Branch first If the Fed approves of the bank's Stablecoin related activities they'll be Given a special letter called a quote Supervisory non-objection letter Naturally the bank will also have to Prove to the FED that it has addressed The operational cyber security liquidity Illicit finance and consumer compliance Risks associated with their stablecoin Related activities What's odd is that the authors don't Give much information about the consumer Compliance risks all they say is that The bank must ensure that it is Upholding the quote regulations that Apply to the specific dollar token Activity

This seems to be a not so subtle Reference to the kyc provision for Stable coins in the U.S defense Bill Recall that the FED had asked for this In its January announcement So this begs the question of what Happens to banks that are already Engaging in stablecoin related Activities well one of the footnotes has An answer All U.S banks already engaging in Stablecoin related activities must Notify the FED within 30 days of its Announcement so by the 8th of September 2023 the footnote also notes that Banks Already engaging in stablecoin related Activities will be allowed to do so Until the FED is finished deciding Whether to provide that special Supervisory non-objection letter It's not entirely clear if this decision Period also ends on the 8th of September Or has an indefinite timeline the Footnote also doesn't say what happens To Banks already engaging in stablecoin Related activities that fail to receive Fed approval or fail to notify the FED About these activities chances are they Would be forced to stop engaging in all Such activities and potentially face Fines or worse We couldn't help but notice that the Final footnote references the warning Issued by the fed and other Regulators

To Banks working with crypto back in Early January this was the warning that Kicked off the first stage of the crypto Crackdown the same warning that said Crypto activities are inherently unsafe Castle Island Ventures partner Nick Carter believes that the August Announcement codifies the pressure That's been applied to crypto-friendly Banks since January Nick calls this quote regulation by blog Post and he underscored the fact that This scrutiny is also being applied to Entities in the non-banking sector Nick Also noticed the same thing that we did And that's that the wording around the Stablecoin related risks that Banks must Address makes compliance impossible for Stable coins issued on public Blockchains as such Nick believes this New guidance is a way of banning Banks From working with crypto stable coins The good news is that non-bank entities Will continue to have the ability to Provide stablecoin related services and It's possible that PayPal is looking to Capitalize on this with its new Stablecoin the bad news is that Non-banks are also starting to face fed Scrutiny which could cause other issues All of which brings us on to the big Question and that's what the fed's Recent announcement means for the crypto Market well the short answer is that

We'll find out around the 8th of September after all banks have notified The FED about their stablecoin related Activities and the FED starts deciding Who lives and who dies however this September deadline could be extended Besides the fact that the FED could take Additional time to decide whether to Issue those special letters of approval Or rejection the kyc provision on stable Coins in the U.S defense bill could also Extend the deadline by up to four months That's because the defense bill Specifies that the kyc provision on Stable coins could go into Force as long As 120 days after it's passed this Ultimately depends on when the treasury Department decides to implement this Provision some would say that it would Look to do so as soon as possible on That note it's possible that the FED Won't be able to do anything about Banks Already providing stablecoin Services Until the defense bill is passed that's Because the August announcement says Consumer compliance risks must be Addressed in line with existing laws About stable coins until that defense Bill is passed and the treasury Implements the kyc provision on stable Coins the FED won't be able to force Banks to stop providing services for Crypto related stable coins again this Assumes that the kyc provision for

Stable coins will be included in the Final version that becomes law This is by no means guaranteed it's more Than likely that pro-crypto politicians In the house will try and remove it for Reference the defense bill was recently Passed by the Senate and is currently Working its way through the house once Approved it'll be sent to the president And signed into law and there are Actually two very similar defense bills Bouncing between the house and the Senate but well let's not go down that Rabbit hole today now assuming the kyc Provision on stable coins is removed From the defense bill it's more than Likely that banks will continue to face Scrutiny from the FED for any crypto Related Services they provide it also Won't protect non-payment stable coins From the SEC which is still actively Trying to kill crypto assuming the kyc Provision on stable coins remains in the Defense bill then it's quite possible That U.S banks will not be allowed to Provide any crypto stablecoin related Services how much this affects the Crypto Market fundamentally depends on How intertwined stablecoin issuers are With U.S banks us-based stablecoin Issuers like Circle clearly have Connections to U.S banks which means They would be the most affected now the Silver Lining here is that neither usdc

Nor usdp are really used much outside of Defy A disruption to their operations Wouldn't have a direct effect on the Crypto Market Per Se not only that but Banks could continue to offer services For crypto stable coins if their holders Complete kyc this is something that Circle has apparently been preparing for It's been working on its own digital ID Solution dubbed verite that said whether Crypto users would adopt a ky seed Stablecoin remains to be seen by Contrast it's not clear how connected Offshore stablecoin issuers like tether Are to U.S banks it's also not clear if The indirect connections offshore Stablecoin issuers have two U.S banks Fall under the scope of the fed's new Requirements note they must have Indirect connections due to their USD Reserves if offshore stable coins manage To outmaneuver the fed's new Requirements and the defense Bill's kyc Provisions then it would likely result In even more adoption of said stable Coins the catch is that their continued Growth would make them even bigger Targets for U.S Regulators if the recent Crackdown on Dell tech bank is any Indication offshore stable coins aren't Off limits to the US government if U.S Authorities want them gone they will Find some way to do it if their attitude Towards domestic stable coins is

Anything to go by offshore stable coins Are a Target too Some would say the goal is for every Crypto to trade against a kyc stablecoin Controlled by the FED whatever the case It's safe to say that the next month is Going to be a fascinating time for Stable coins of all kinds that's why It's important to understand what role Each stablecoin plays in the crypto Market and how changes in their market Caps could affect crypto prices we Happen to have a video about exactly That and the link is down in the Description And folks that is all for today's video If you found it informative let me know By Smashing that like button if you want To stay informed subscribe to the Channel and ping that notification Bell If you want to help others stay informed Be sure to share this video with them if You think they ought to see it of course And if you're the kind of crypto cat who Stacks SATs instead of stable coins make Sure you're accumulating them using a Cost-effective exchange and storing them On the most secure crypto wallet you can As it so happens the coin Bureau deals Page can help with both it's got up to Forty thousand dollars in discounts Airdrops and incentives on the best Crypto exchanges and the biggest Discounts on the best hardware wallets

The link will be down in the description Thank you all for watching and I'll see You in the next one so until then stay Cool stay out of trouble and stay crypto


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