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Former FDIC Regulator: Friendliness Toward Crypto 'Does Not Exist'

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U.S. regulators may be using recent turmoil in the financial world as a way to kick crypto companies out of the banking system, said Jason Brett, a former regulator at the Federal Deposit Insurance Corporation (FDIC).

“It’s about the friendliness towards crypto, and it just does not exist,” Brett, managing director at consulting firm Key Bridge Advisors and a Forbes regulatory analyst for digital assets, told CoinDesk TV’s “First Mover” on Thursday.

Last week, California-based Silvergate Bank said it would be “voluntarily liquidating” its assets and closing its doors. The firm, which primarily served crypto companies, also closed its SEN platform.

Two days later, Santa Clara, California-based Silicon Valley Bank (SVB), a go-to institution for venture-backed tech startups, was taken over by the California Department of Financial Protection and Innovation, which said the firm had “inadequate liquidity and insolvency.” This past Sunday, New York-based Signature Bank was closed by state regulators in what they called an effort “to protect investors.” Like Silvergate, Signature Bank operated its own real-time payments platform, Signet.

The FDIC took receivership of SVB and Signature, giving the agency discretion to manage each of the bank’s assets and liabilities.

According to Brett, efforts by federal regulators to keep crypto companies from accessing the U.S. banking system may have been taking place even before the recent bank collapses.

Case in point: He mentioned former FDIC Chairman Jelena McWilliams, appointed by former President Donald Trump, “who was a big fan of crypto,” and who was “pushing that at the FDIC.” She resigned effective Feb. 4, 2022, according to her letter to current President Joe Biden.

She “was basically ousted in what was almost a coup d’etat,” Brett claimed, adding the Consumer Financial Protection Bureau (CFPB) swooped in and took over the FDIC’s agenda.

“Now, you see Chairman [Martin J.] Gruenberg there at the top of the FDIC, and he has not been a fan of fintech, much less crypto,” Brett said. Gruenberg was sworn in as FDIC chairman on Jan. 5, 2023.

Yet, Brett said he “wouldn’t go so far as to say all of the banks have been shut down because of crypto.”

The latest failures in the banking industry raise some questions for regulators “about how much attention they paid,” Brett said.

“We're not in a crypto crisis. This isn't a financial crisis, yet, but this is a banking crisis,” he said. “This is a crisis of how the banks are managing their books.”

Read more: Stop Blaming Crypto for Traditional Finance Failures / Opinion