Banking Regulators Accused of Debanking Scheme Targeted at Cryptocurrency
On January 23, 2025, President Trump signed an executive order aimed at supporting the growth of digital assets and blockchain technologies across the American economy, mitigating risks associated with Central Bank Digital Currencies (CBDCs), and protecting fair and open access to banking services for all private-sector entities. This executive order was created following accusations from industry leaders in digital assets who claim that banking regulators at the Federal Deposit Insurance Corporation (FDIC) were encouraged by the Biden administration to instruct banks to deny banking services to digital asset companies, also known as debanking. To investigate these claims further, the United States Senate Committee on Banking, Housing, and Urban Affairs conducted a hearing on February 5, 2025 to hear directly from industry leaders about the depth and impact of the allegations.
Major Regulatory Rollbacks Expected from Trump’s New SEC
With the return of the Trump Administration looming large, rumors of possible regulatory appointments are already swirling. One federal agency that will undoubtedly see major changes with the transition of power is the Securities and Exchange Commission (SEC), the authority responsible for regulating the securities market and protecting investors. With the shift in presidential administration coupled with significant GOP gains in the House and Senate, analysts have begun to speculate on how agency leadership and staffing changes will impact securities policy and rulemaking, and what the rest of the country can expect from the markets over the next four years.
U.S. Sanctions International Drug Trafficking
On October 03, 2023, the Biden administration announced indictments and sanctions against 28 individuals and entities, including China-based companies and their employees related to the trafficking of chemicals needed for the manufacturing of fentanyl. The sanctions aim to interrupt the global supply chain of fentanyl as the administration have increased their efforts on tackling the opioid epidemic. However, rising tensions in the U.S.-China relationship have delayed progress. On September 15, 2023, President Biden added China to the list of the world’s major illicit drug producing and drug transit countries. In response, China’s Ministry of Foreign Affairs stated that the designation is a malicious smear against China. The Ministry further urged the U.S. to do things in ways that are conducive to cooperation with China, not otherwise. With growing international tensions and an epidemic still afoot, the U.S. faces a challenging uphill battle with fentanyl.
The Downfall of Cryptocurrency, and Celebrities
Cryptocurrency entered the mainstream economy in 2013 when Forbes listed Bitcoin as the best investment of that year, calling 2013 the “year of the bitcoin.” Then, in 2014, Bloomberg News made the statement that Bitcoin was one of the year’s worst investments. Since these early days, citizens and economists alike have remained skeptical of Bitcoin and other cryptocurrencies. Over the past few years, celebrities have gotten increasingly involved in “pushing cryptocurrency and non-fungible tokens at a speed once reserved for viral dances,” according to the Washington Post. In the wake of recent events, the Securities and Exchange Commission is beginning to crack down on celebrity endorsement that has gone too far.
Regulatory Scrutiny of Crypto Exchange “Binance” May Cause it to Leave the U.S.
State and federal regulators are opposing a billion-dollar deal between the cryptocurrency exchange Binance.US and the bankrupt cryptocurrency lender Voyager. The regulatory intervention is part of an ongoing struggle between Binance, the ultra-dominant cryptocurrency exchange, and U.S. regulators. Tensions between the two appear to be nearing a boiling point. The dispute also highlights an American regulatory environment that is increasingly hostile toward the cryptocurrency industry writ large, particularly in the wake of the FTX cryptocurrency exchange collapse.
Regulatory Ecosystem Post-FTX (SBF) Disaster
From “How are institutions and companies investing in crypto” and “Sequoia Capital launches $500 million fund to invest in crypto” to “FTX files for bankruptcy” and “Sequoia Capital marks down its $210 million crypto investments to $0” – the crypto market capitalization skydived from $3 trillion in November 2021 to $881 billion, experiencing a 71% freefall in just one year.
Major household names such as FTX, BlockFi, Celsius, Genesis, TerraLuna, Three Arrows Capital, and Voyager all evaporated within days after public recognition of corporate issues including capitalization and intra-firm lending. Last summer’s TerraLuna and Voyager bankruptcies foreshadowed the debacle to come. However, enthusiasts remained naively optimistic until the shockwave of FTX’s evaporation led to the collapse of an entire market. Investors rushed to withdraw their investments only to see their accounts already frozen or funds already missing. Before it is too late, either the Commodities Futures Trading Commission (CFTC) or the U.S. Securities and Exchange Commission (SEC), or the agencies jointly together, should take action on this volatile decentralized market.
The Collapse Of FTX and The Future Of Crypto
New investment vehicles and opportunities have flooded the financial services industry over the past few decades, but arguably none have grown in popularity at a rate comparable to cryptocurrency. A cryptocurrency is a digital or virtual currency typically based on a decentralized network that utilizes blockchain technology. In other words, this decentralized feature allows a network of users to verify and record transactions without relying on any central authority, which permits the cryptocurrency to exist without government interference.
The OFAC Continues to Enforce Strict Sanctions on Cryptocurrency Mixers
Recently the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) added Tornado Cash to its Specially Designated National List. As part of enforcement efforts, the list contains individuals and companies that have been owned or transacted with targeted countries or organizations that may prove to be a threat to the United States. This action gives rise to questions regarding “secondary” sanctions/designated risk, and the effect this policy has on smart contracts and other protocols.
Regulating the Unregulated: Where is Cryptocurrency Headed?
While over 10 years have passed since Satoshi Nakamoto first introduced Bitcoin, digital currencies continue to remain unregulated by financial authorities despite a number of challenges that have plagued consumers and the government: the Silk Road, fraud, and various other financial crimes. Additionally, many consumers invest in cryptocurrencies because they are not controlled by any central government monetary policies. However, cryptocurrency investors are also at risk of their money losing its value when the market takes a tumble, as evidenced by the recent current cryptocurrency downturn. Despite these continued challenges, imposing regulations on cryptocurrencies has proven to be difficult. Until President Biden’s Executive Order, issued on March 9th of this year, the White House steered clear of recognizing digital assets as a valid form of currency. The President’s Order explicitly recognized the need for research and policy implementation across various government agencies in order to shape the way cryptocurrencies are regulated.
Is Stablecoin Really Stable?
On June 22nd, ten-year-old Yuna was reported missing by her teachers. Just one week later, the police discovered a sedan in the southernmost coast of South Korea, two hours away from Yuna’s home. The three bodies recovered belonged to Yuna and her parents, both in their thirties. The police suspected suicide. Among the parent’s last online searches included “LUNA,” “sleeping pills,” and “how to commit suicide.” Evidence further suggested that Yuna’s parents were unemployed, invested their lives savings into the cryptocurrency market, and struggled from financial debt of $100,000.