Please bear with us a little when it comes to cryptocurrencies this holiday season.
To hear many industry leaders tell it, they are victims, a persecuted class of well-intentioned innovators who are locked out of the U.S. banking system because they pose a disruptive threat to the status quo.
Of course, this man’s challenge has fueled cryptocurrencies since its early days, when the industry had the feel of a Rebel Alliance challenging the Empire.
But these days, with a cryptocurrency market worth $3.6 trillion, Bitcoin’s acceptance by Wall Street, and coincidentally the incoming president of the United States, the industry’s persecution complex is feeling pretty grim. It’s like listening to a Hollywood superstar complain about fame.
Last week, billionaire venture capitalist Marc Andreessen appeared on the podcast “The Joe Rogan Experience” to denounce a “super nefarious” conspiracy hatched by the Biden administration and apparently U.S. financial institutions. , the number of victims of virtual currency has reached its peak once again. Secretly debunking the “30 founders” of technology and cryptocurrencies.
choke point
Andreessen was referring to a hot theory called Operation Choke Point 2.0. This is a “deep state” conspiracy to thwart crypto companies by blocking access to the very financial systems they seek to disrupt and replace. (Operation Chokepoint was an Obama-era effort that targeted fraud across a wide range of industries, including payday loans, pornography, and tobacco.)
Andreessen’s comments prompted a chorus of complaints from his peers.
Kraken co-founder Jesse Powell complained that crypto exchanges have suffered for years due to the absence of U.S. banks.
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Sam Kazemian, founder of stablecoin issuer Frax Finance, has told how he was fired as a customer by JPMorgan Chase because his funds were derived from cryptocurrencies.
And Coinbase CEO Brian Armstrong used this moment to attack Massachusetts Democratic Sen. Elizabeth Warren, who has taken a hard stance against cryptocurrencies. Made them even better.
Affirming Andreessen’s comments, Armstrong said debanking was “one of the most unethical and un-American things that has happened in the Biden administration, and my guess is that there are a lot of Elizabeth Warrens out there.” (Biden himself probably wasn’t aware of it).”
Please hold on tight.
Banks have long been cautious about who they do business with. This is not a conspiracy, but basic risk management.
unexpected risks
Lenders maintain their deposit-taking licenses by complying with rules and enduring annual “stress tests” conducted by regulators. The idea is that this will help prevent companies from going bankrupt, and large companies will need to be bailed out by taxpayers.
Of course, this is not a foolproof system, but it is designed to protect depositors from unexpected risks.
To be honest, cryptocurrencies are not necessarily a low-risk sector.
According to Chainalysis, hacking, rug-pulling, and all kinds of skullcaping are rampant, with more than $24 billion in illicit money flooding into the industry in 2023.
As a reminder, Binance, the world’s top cryptocurrency exchange, has been charged with violating U.S. banking laws for using its platform to assist criminals who laundered billions of dollars in dirty money. Just 12 months ago, he pleaded guilty and paid a $4.3 billion fine.
If that wasn’t enough, Tornado Cash, a cryptocurrency mixer, has stolen $455 million from the Lazarus Group, a North Korean hacking group that allegedly funds the pariah state’s nuclear weapons program. He is said to have laundered $7 billion worth of cryptocurrencies, including:
elite bank
You can’t exactly blame lenders for being cautious. After all, elite banks such as HSBC, Citigroup, Deutsche Bank, and BNP Paribas have themselves paid billions of dollars in fines in the past few years for similar violations to Binance.
The bottom line is that banks don’t need a government conspiracy to blame crypto companies. Good old-fashioned risk aversion works.
consent
What’s interesting about this jagged part of the debunking is how much acceptance cryptocurrencies have gained in the last year.
Despite a new generation of retail investors flocking to Bitcoin ETFs (BlackRock’s IBIT fund rocks $48 billion in net assets), Wall Street asset managers are getting carried away with the rollout of new products. are.
In 2021, JPMorgan, led by cryptocurrency skeptic Jamie Dimon, became the first major bank to help private wealth management clients invest in cryptocurrency funds.
So maybe it’s time to stop whining and start building the kind of business that banks want to bank with you.
At the end of the day, all lenders care about is a simple ratio: Are you getting a good reward for your risk?
The rest is just noise.
Correction: Updated on December 3 to correct when JPMorgan offered personal wealth management services. It was 2021, not 2024.
Edward Robinson is DL News’ story editor. The opinions expressed in this editorial column are his own. Please contact the author at ed@dlnews.com.
