Recent reports claim that Coinbase is seeking clarity on the status of banking services related to crypto. In a letter, the exchange allegedly urged US regulators to confirm whether banks can offer services to crypto businesses. This move comes before the US Congress hearing regarding “Operation Chokepoint 2.0,” where the crypto exchange’s CLO will testify alongside other industry figures.
Coinbase Seeks Clarity On Crypto Banking Barriers
On Tuesday, Bloomberg reported that crypto exchange Coinbase had sent a letter to the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board of Governors, and the Federal Deposit Insurance Corp (FDIC), asking the agencies to clarify the crypto banking status.
In the letter, seen by the news media outlet, the exchange urged the OCC to withdraw an interpretive letter that “imposes a de facto application process for novel bank activities” and prevents the financial entities from entering the crypto market, according to Coinbase.
The exchange also asked the Fed and the FDIC to confirm if state-chartered banks can provide and outsource custody and execution services related to cryptocurrencies.
The report also highlighted a letter from three law firms retained by Coinbase. The letter argues that the existing federal laws and regulations already authorize banks to provide crypto services and engage with third-party service providers like the crypto exchange.
Nonetheless, Coinbase allegedly stated that banking regulators must confirm it. The exchange’s CPO, Faryar Shirzad, argued in an interview, “It’s important for regulators to make clear that banks can work with third-party providers in providing trading and exchange services to their customers.”
“At Coinbase, we are very much of the view that we need a comprehensive ecosystem to support the crypto economy,” Shirzad stated, adding, “That’s why we’ve been so active on bank issues, even though they involved regulatory fixes that helped the banks. In our view, it’s beneficial to have broad participation in the crypto economy.”
American Banks ‘On Hold’ With Crypto Activities
US financial institutions have participated in markets for Bitcoin exchange-traded funds (ETFs) through their trading and wealth management arms while refraining from allowing customers to use crypto assets for retail transactions.
The FDIC has reportedly issued letters between March 2022 and May 2023 asking certain financial institutions to pause planned or ongoing crypto-related activities while seeking additional information.
As a result, US banks have been in “a holding pattern” regarding offering crypto services. Bank of America CEO Brian Moynihan recently stated that the US banking industry will embrace digital asset payments if the regulators allow it.
At the World Economic Forum in Davos, Switzerland, the CEO affirmed that banks will “come hard” to crypto when the regulations are clear. Moynihan argued that the banking industry’s approach to digital assets could change with the new industry-friendly administration, adding that the financial giant is ready to enter the sector, as they have “hundreds of patents on blockchain already” and “know how to enter the field.”
The push from Coinbase comes as the new crypto-friendly administration makes significant moves to end the Biden administration’s crackdown on the sector and create better and clearer regulations.
On Wednesday, Coinbase’s CLO Paul Grewal will address the alleged Operation Chokepoint 2.0 as a key witness in the US House Committee on Financial Services Republicans hearing, called “Operation Choke Point 2.0: The Biden Administration’s Efforts to Put Crypto in the Crosshairs.”
The CLO will testify alongside MARA Holdings CEO Fred Thiel, WSPN CEO Austin Campbell, and Anchorage Digital CEO Nathan McCauley.
