New FDIC Leadership May Improve Bank-Crypto Relations

The FDIC's Chair nominee, Christy Goldsmith Romero, might allow banks to choose if they want to work with digital asset companies. This could lead to better cooperation between US financial institutions and the crypto industry, potentially reducing existing restrictions.

Christy Goldsmith Romero, up for FDIC Chair, proposed that banks should decide on their own whether to serve digital asset firms. Responding to Senator Cynthia Lummis, Romero stated, "It's not the FDIC’s job to tell banks which industries to serve." This marks a shift from the FDIC’s previous cautious stance on crypto.

Coinbase Chief Policy Officer Faryar Shirzad emphasized the importance of Romero’s comments, linking them to Operation Chokepoint 2.0, which many believe unfairly targets the crypto sector. However, Shirzad warned that change would require the White House to withdraw its directives and for nominees to actively reverse current pressures. He noted, "Bank regulators claim there’s no targeted debanking of the crypto sector."

If the FDIC follows Romero’s approach, it would be a significant policy shift. Earlier this year, the FDIC, Federal Reserve, and Office of the Comptroller of the Currency warned that crypto-focused business models could threaten banking safety. They stated, "Issuing or holding crypto-assets on open, public networks is likely inconsistent with safe banking practices."

This cautious stance led many banks to limit or end services for crypto businesses. For example, Erik Voorhees, founder of crypto exchange Shapeshift, complained that fintech firm Revolut closed his account due to his crypto activities.

Despite these restrictions, the crypto industry is fighting back. Coinbase sued the FDIC and SEC, seeking documents on their crypto regulation approaches. The Bank Policy Institute also supports repealing the SEC's rule that limits banks from offering crypto custodial services.

Romero's potential role as FDIC Chair could improve the relationship between banks and the crypto industry. If banks can independently decide to serve crypto companies, it could lead to more innovation and growth in digital assets.

The crypto sector has long opposed stringent regulations that hinder growth. A balanced regulatory environment, as suggested by Romero, could create better interactions between the crypto industry and traditional financial institutions.

Christy Goldsmith Romero’s nomination as FDIC Chair brings hope for better relations between banks and the crypto industry. Her view that banks should choose on their own to serve digital asset companies could lead to significant policy changes, easing restrictions and promoting crypto growth. While challenges remain, this potential shift could foster a new era of cooperation and innovation in finance.