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Washington raises concerns as consumers bank with crypto

3 min reading

The US Federal Reserve with other government bodies are currently going through so much to strengthen the financial turbulence caused by cryptocurrencies

The U.S Federal reserve with other governmental entities and officials are going through a lot to handle with the financial disruption which happened due cryptocurrencies move into bank and other financial services. There are officials who are trying to understand how to restrain what they see as a threat from an industry “whose short history has been marked as much by high-stakes speculation as by technological advances”. 

The times story notes efforts by the U.S Securities and Exchange Commission (SEC) to help the experts to help it handle with the exploding industry. Noticing that it can take at least a year to write rules or get Congress to act regulators could issue guidance in the interim. $600 million of hack of PolyNetwork singles out crypto lender BlockFi pointing out that company’s sudden development and legal troubles as well as decentralized finance (DeFi) “operates completely outside the regulatory system”. 

Crypto is the new shadow bank,” the article quotes U.S Sen. Elizabeth Warren (D-Mass). A vocal crypto critic as saying. “It provides many of the same services, but without the consumer protections or financial stability that back up the traditional system.” The articles stated that regulator is worried about the adequacy of the cash reserves and algorithms that support stablecoins in which many DeFi loans and deposits are denominated. Warren introduced the idea of cancelling U.S banks from holding the cash deposits that support many stablecoins. Fed Chairman Jerome Powell’s recent statement stated that a U.S CBDC “could undermine the entire crypto ecosystem.” 

There is an article mentioned that many traditional financial institutions are worried about disruption at the hands of DeFi but makes no mention that many are themselves initiated to give crypto services or that a number of crypto companies. Wyoming-based Avanti and Kraken are themselves looking for the right of being a regulated bank. 

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