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.

Peter