Author: elisa
Translation/Posting: langford
U.S. based financial institutions that want to offer both cryptocurrencies and traditional banking services are forced to make only one choice. This situation is likely to change soon. The Federal Reserve has issued formal guidelines to allow cryptocurrency service providers to operate traditional banks at the same time.
[So why is this important?]
As with the recent bankruptcy of US-based crypto lending platforms Celsius and BlockFi, these crypto service providers are not legally qualified as banks. This means their customers do not enjoy the same protections as traditional bank customers. If a traditional bank fails, the U.S. government provides a certain amount of guarantee. This amount is a type of insurance that the bank provides to the customer.
In the case of Celsius and BlockFi, their customers currently get nothing after bankruptcy. Of course this does not mean Celsius or BlockFi can meet the standards of Bank of America. Take the example of Celsius, their business does not meet the strict requirements of the current banking industry at all, and they take risks that are far higher than ordinary banks can bear.
[The Fed is in a tough spot]
License applicants usually takes 5 to 7 days to receive a response from the Federal Reserve for a banking service application. However, major U.S. cryptocurrency exchange Kraken has been waiting for a response from the Federal Reserve for years. They are eligible for a banking license under a new Wyoming law and have been waiting for a response from the Fed from 2020, but the Fed is having a hard time making a decision.
That all took a turn on Monday, when the U.S. central bank, the Federal Reserve, announced that it had finalized guidelines for the establishment of so-called “master accounts” at the central bank. Crypto banks will also be eligible for this treatment. New guidance offers solutions for digital banking. “The new guidance provides a consistent and transparent process for evaluating requests to the Federal Reserve for banking licenses and payment services to support secure, inclusive and innovative payment systems,” said Fed Vice Chair Lael Brainard. .” This is not the most exciting news, but it is a good development of confidence in the crypto industry.
