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The former Chief of the US Securities and Exchange Commission (SEC) Office of Internet Enforcement, John Reed Stark, stated an ongoing “unprecedented financial regulatory onslaught” against the US crypto space.
On August 10, Stark took to social media platform X making these claims based on the crypto-related policies set by certain US financial regulators in the last few years.
Former SEC Chief Speaks On New Fed Program
Firstly, John Reed Stark begins his case by highlighting the recently introduced “Novel Activities Supervision Program” by the US Federal Reserve (Fed) on August 8.
According to the former SEC Chief, part of this program aims to regulate US banks’ involvement with dollar-backed tokens such as the recently launched PaypalUSD or other stablecoins.
Under the new Fed directive, banks intending to issue, hold or trade dollar-backed tokens must obtain a written supervisory non-objection letter from the American apex bank having proven their ability to handle these assets in a “safe and sound manner.”
However, John Reed Stark states this would be a “challenging” task for most traditional banks as the Fed judges their ability to manage the numerous risks associated with these dollar-backed tokens. These risks include money laundering, customer runs, and hacks.
Moving on, Stark pointed to an “aggressive” crypto regulatory policy by another traditional regulator – the Federal Deposit Insurance Corporation (FDIC).
The former SEC Chief noted in April 2022 that the FDIC wrote a Financial Institution Letter (FIL) to all FDIC-supervised banks instructing them to inform the corporation before dealing in any crypto-related activity.
Following this notification, the FDIC would examine the potential effects of these activities regarding consumer protection and general financial stability before granting an appropriate supervisory response.
To John Reed Stark, US crypto users should consider the said FIL a “forerunner” of heightened FDIC supervision of all bank-related crypto dealings.
Finally, Stark draws attention to another similar order by the US Office of the Comptroller of the Currency (OCC).
The former SEC Chief states that the OCC Interpretive Letter No. 1179 mandates all national banks and federal savings associations seeking to engage in crypto-related activities to show evidence of an “adequate control system.”
However, Stark believes the lack of a “comprehensive framework” in the US makes this task quite “puzzling.” Therefore, the OCC Letter No.1179 could represent a “harbinger” of the OCC’s larger vision to restrict national banks’ crypto involvement heavily.
US Regulators Setting Sights On Other Digital Asset Sectors
In his closing remarks on the growing regulatory pressure on the US crypto space, John Reed Stark notes that the United States financial regulators have begun extending their oversight beyond cryptocurrency and other aspects of the digital asset economy.
The former SEC Commissioner highlighted the SEC’s ongoing case against Coinbase, Binance, and other crypto exchanges to support his case, which could likely “threaten the sovereignty of the decentralized finance (DeFi) ecosystem.”
In addition, Stark also pointed to the use of non-fungible tokens as a target regulatory site with NFT-related prosecutions already being led by the US Department of Justice.
John Reed Stark believes an “unprecedented crypto regulatory firestorm” continues to swell exponentially, and all US crypto users should be “well aware.”
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