Riding The Wave News Summary #68
US Regulator 'Improperly' Pushing Banks to Avoid Serving Crypto Companies, Lawmaker Says, Genesis Cuts 20% of Staff, CEO Michael Moro Out, & more
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The Federal Deposit Insurance Corporation (FDIC) may be leaning on banks to prevent them from providing services to cryptocurrency companies, U.S. Sen. Pat Toomey (R-Pa.) said Tuesday, citing communications he had received.
In a letter directed to Acting FDIC Director Martin Gruenberg, Toomey wrote that he had heard from "affected parties" and whistleblower communications that claimed the federal bank regulator had tried to "deter banks from doing business with lawful cryptocurrency-related companies," even though providing services to these companies is not illegal. Toomey asked the regulator to confirm whether any FDIC official had indeed asked banks to not do business with crypto firms, and if so, to explain why.
"According to whistleblower communications that we have corroborated, personnel in the FDIC’s Washington, D.C., headquarters are urging FDIC regional offices to send letters to multiple banks requesting that they refrain from expanding relationships with crypto-related companies, without providing any legal basis for sending such letters," Toomey wrote.
FDIC officials also allegedly directed a regional branch to "downgrade" the classification of a loan made by a bank to a crypto company, which Toomey called "highly atypical."
In April, the FDIC published an open letter addressed to any banks or other institutions it oversees, directing them to contact the FDIC before it engages in "a crypto-related activity." The regulator said it would assess the information provided by the bank to check for "safety and soundness," and provide feedback if needed.
The letter is similar to one published by the Federal Reserve this week, which also directs banks under its supervision to contact the central bank prior to engaging in crypto activities.
This situation isn’t extremely surprising given the current state of crypto. During bear markets, crypto critics tend to come back with a vengeance as they are often ignored during bull runs due to all of the excitement. It also doesn’t help that many crypto companies are facing bankruptcy due to being over-extended or other financial instability.
Crypto broker Genesis Trading announced that the firm’s CEO Michael Moro will be immediately stepping down from his role.
Derar Islim, Genesis’ chief operating officer, will take over as interim CEO while the firm is seeking a permanent replacement.
The firm will also cut 20% of its 260-person workforce to reduce costs, per Bloomberg.
The leadership reshuffle also saw Genesis hire several key executives, who, as the company hopes, will “further strengthen its governance and position the firm for the future.”
Chief financial officer Alice Chan and chief legal officer Arianna Pretto-Sakmann join the expanded leadership team “focused on strengthening the company’s overall risk management.”
Companies that provide purely crypto-related services are clearly still taking a beating until the market turns around, it’s unlikely we will see hiring outside of finance and legal roles. Finance and legal are the exceptions, as these companies are now on the defensive and will use these roles to protect them from the bear market criticisms that follow the bull market euphoria.
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