Senator Lummis Criticizes Fed's Crypto Policy Shift as Insufficient

United States Senator Cynthia Lummis has expressed skepticism over the recent decision by the Federal Reserve to withdraw its 2022 supervisory letter that discouraged banks from engaging with crypto and stablecoin activities. Lummis, known for her pro-crypto stance and advocacy for the Bitcoin Strategic Reserve Bill, described the Fed’s move as “just lip service” and “not real progress.”

Lummis argued that the Fed continues to rely on reputational risk in its bank supervision practices, which she considers illegal. She also pointed out that the Fed’s policy statement in Section 9(13), which classifies Bitcoin and digital assets as “unsafe and unsound,” remains in effect. Additionally, Lummis highlighted that many of the staff involved in Operation Chokepoint 2.0 are still influencing crypto policy today, suggesting a continued hostile stance towards the industry.

Lummis’s criticism contrasts with the broader crypto industry’s reaction, which has generally welcomed the Fed’s announcement. Industry figures like Michael Saylor and Anthony Pompliano have suggested that the move is a step forward for banks and crypto. However, Lummis’s perspective underscores the need for more comprehensive and transparent regulatory measures. She emphasized that the Fed’s actions do not provide the clarity and stability required for the crypto industry to thrive.

The Federal Reserve’s decision to relax crypto partnership rules for banks is part of a broader trend among U.S. banking regulators. Other agencies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, have also withdrawn previous warnings and directives related to crypto activities. This coordinated effort aims to create a more favorable environment for banks to engage with cryptocurrencies, potentially fostering innovation and growth in the sector.

However, Lummis’s skepticism highlights the need for more comprehensive and transparent regulatory measures. The Senator’s stance suggests that while the Fed’s actions may signal a shift in policy, they do not go far enough in providing the clarity and stability that the crypto industry requires. The lack of real progress, as Lummis sees it, could hinder the development of a robust regulatory framework that balances innovation with consumer protection and financial stability.

The withdrawal of these directives also raises questions about the future of crypto regulation in the United States. While the Fed’s move may encourage more banks to explore crypto partnerships, it remains to be seen whether this will translate into meaningful advancements for the industry. The absence of clear guidelines could lead to uncertainty and potential risks for both banks and consumers.

In summary, Senator Lummis’s criticism of the Fed’s withdrawal of crypto guidance underscores the need for more substantive regulatory progress. While the Fed’s actions may signal a shift in policy, they do not address the underlying issues or provide the clarity and stability that the crypto industry requires. The coordinated efforts of U.S. banking regulators to relax crypto partnership rules for banks may foster innovation, but the lack of real progress could hinder the development of a robust regulatory framework.