Friday, March 17, 2023

Looks like Barney Frank was right - cryptocurrencies may be threatened


A couple of days ago I reported a comment by Barney Frank on the government takeover of Signature Bank in New York.  He said:

A regulatory takeover of a New York-based bank was intended to send a message to U.S. banks to stay away from the cryptocurrency business, a former member of Congress who was on the bank’s board says.

Former U.S. Rep. Barney Frank said Monday that he believes the state officials behind the action were trying to make an example of Signature Bank in takeover that he said was the wrong move. Despite a wave of withdrawals, the bank's situation was under control before regulators swooped in, he said.

“This was just a way to tell people, ‘We don’t want you dealing with crypto,’” Frank said in an interview.

There's more at the link.

Some hurried to deny that any such "message" was involved - but events since then tend to confirm what Mr. Frank said.

Regulators at the U.S. Federal Deposit Insurance Corp (FDIC) have asked banks interested in acquiring failed lenders Silicon Valley Bank and Signature Bank to submit bids by March 17 ... any buyer of Signature must agree to give up all the crypto business at the bank. But an FDIC spokesperson told Reuters after publication that the agency would not require divestment of crypto activities as part of any sale, and pointed to prior comments from FDIC Chairman Martin Gruenberg that the agency is not looking to prohibit any particular activity by banks.

Again, more at the link.

Why would the FDIC impose such a requirement?  On what legal authority?  As far as I know, "crypto business" is not illegal, and has never been banned or restricted as such.  This smacks to me of yet another bureaucratic power grab by the establishment.

I've never trusted cryptocurrencies such as Bitcoin and its myriad imitators.  They had nothing backing them to begin with, and have no security now.  Nevertheless, a fundamental, underlying principle of US law and jurisprudence is that if something is not forbidden, it's permitted.  In totalitarian states, it's the other way around:  unless something is specifically permitted, it's forbidden.  For the FDIC to take this stance appears to be a totalitarian approach.  "We decree that this is bad;  therefore, shun it - or else!"  There is no law requiring that;  only bureaucratic edict.

This also reminds me of the US government's seizure of private gold reserves in 1933.  That was accomplished under a World War I statute that had never been intended for such a purpose, but had never been repealed either.  It was amended, then used as an excuse and a legal "lever" to accomplish President Roosevelt's objectives via executive order rather than new legislation.  Is the Biden administration planning to, or considering, using such precedents to restrict or forbid trading in cryptocurrencies?  In the light of the FDIC's insistence, one wonders . . .

In the light of current developments, I submit that anyone with cryptocurrency holdings should very carefully consider their position, and act with caution and prudence.



Michael said...

As Crypto is a threat to their plan to eliminate cash...

Do you think anything of importance is "Accidental"?

Create a problem
Offer THE Solution
Then steal your freedoms with the electronic python.

Note that elimination of cash is the PLAN so they can control everything you buy and sell. China’s Social Score in 3,2,1

Bad Think? No groceries for you, No gasoline or electricity for you and so on until you “Repent” in a “Struggle Session”.

Repeat offenders get special education in “Health Camps”.

Just ask the Chinese.

Shark said...

Crypto is a purely speculative's simply legalized gambling. Allowing already heavily leveraged (fractionalized?) banks to dabble in crypto is like allowing them to "invest" in the slots in Las Vegas. Why introduce even greater instability into what - in theory - should be a safe savings institution? (Not that they truly are...)
But of course, since the federal government has made it clear that they won't allow any federally insured lending institution - no matter how irresponsibly it acts - to truly fail and be held accountable by penalizing their account holders...despite the $250K account balance insurance limit...the safety breakers are truly off. The U.S. taxpayer is open to unlimited cost - - huge surprise?

Anonymous said...

While Crypto has possibilities long term, so far it has been VERY volatile and more speculation than currency.
Given that volatility, I can see valid concerns about limiting how much a bank has since banks are supposed to be boring and safe, unlike investment funds.
I'm old fashioned - I like money, not a digital currency!

Gaffer said...

A while back there was an executive order that created several study groups for the central government to establish its own crypto currency. (ie: replace all cash and other legal documents with an "electronic wallet")
This might be a first step to justify forcing the public to deal only with electronic money.

Observant Witness said...

As it exists today, crypto is an option. There are questions surrounding it as to precisely in what form and structure it should be conducted, its legitimacy, and even whether or not engaging in crypto is wise.

All that aside, our government does not like crypto because it cannot control it. It does like a crypto solution that it can control which, I think, is the foundational issue because our government believes a government-provided crypto system gives government the control over finances it lacks with actual cash money over which it has extremely limited tracking and monitoring ability.

What we're seeing with Signature bank is our government seeking to limit, or prohibit, development or advancement of non-government al crypto as one step among many to further government monitoring of individual citizens' financial and monetary activities.

This government-run crypto baby should be strangled in its crib forthwith and the remains unceremoniously incinerated.

Ray - SoCal said...

Tom Luongo posits most crypto is pump and dump / Ponzi schemes. An exception is Bitcoin with its transparency.

And that the Fed actions are about destroying the Euro Dollar, and fighting inflation.

Anonymous said...

Note also that there is a concerted effort to pass laws at the State level to prohibit the use of non-government Bitcoin-like digital currency.
Kristi Noem just vetoed such an attempt, and that report said such laws were pending in 20 other States.
John in Indy said...

I trust nothing that disappears if you pull a plug - any more that seems to include the U.S. Dollar....