Key Points:
- Former U.S. Attorney General Donald Verrilli criticizes federal regulators for allegedly blocking crypto banking services.
- Former Solicitor General Paul Clement also raises constitutional concerns over the Fed’s powers in a separate legal brief supporting the crypto industry.
Former U.S. Attorney Solicitor Donald Verrilli has accused federal regulators of actively preventing the crypto banking services.
Regulatory Challenges for Crypto Banking Services
Speaking through a friend of the court brief filed on behalf of Custodia Bank, Verrilli criticized regulators for what he described as a deliberate effort to “debank” the crypto banking services. This comes in response to a Wyoming District Court ruling that upheld the Federal Reserve‘s decision to deny Custodia Bank a master account.
In previous legal development, former Solicitors General Paul Clement has filed an amicus brief questioning the constitutionality of the Federal Reserve’s structure. Clement’s brief, submitted to the 10th Circuit Court, raises concerns about the broad discretionary powers held by Federal Reserve Bank presidents.
SEC Lawsuit Highlights Compliance Issues in Crypto Banking
Meanwhile, the Securities and Exchange Commission (SEC) recently filed a lawsuit against Silvergate Bank, which ceased operations last year. The SEC alleges that Silvergate misled clients about the effectiveness of its compliance programs, including anti-money laundering efforts.
The legal action follows the collapse of the FTX exchange in November 2022, which used Silvergate’s settlement platform and is accused of suspicious transfers totaling nearly $9 billion.
Cryptocurrencies have also reshaped traditional banking, particularly in remittances. By leveraging decentralized technology, cryptocurrencies offer a faster and cheaper alternative to traditional methods of transferring money across borders. However, crypto banking services also lead to a crisis when the market collapse at the end of 2022 is also causing concerns for the US regulators.
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