Analysis of the Federal Reserve’s Regulatory Action Against Customers Bank

Tyler Winklevoss, co-founder of Gemini, has expressed his concerns about the recent regulatory action taken by the US Federal Reserve against Customers Bank. He believes that Operation Chokepoint 2.0 is still very much alive, and the latest move by the Fed is a clear indication of that.

The regulatory action was based on violations of the Bank Secrecy Act, Anti-Money Laundering laws, and OFAC regulations by Customers Bank in relation to their dealings with digital assets. As a result, the Fed has mandated the bank to enhance its oversight, risk management, and compliance measures within a 60-day period. This includes improvements in board oversight, BSA/AML compliance, and OFAC adherence. Additionally, the bank must inform the Fed about any new initiatives or products 30 days before implementing them.

Crypto stakeholders have been vocal in their criticism of Operation Chokepoint 2.0, viewing it as a policy aimed at weakening the industry under President Biden’s administration. Winklevoss highlighted how the Fed’s enforcement action centralizes decision-making, making the Fed the gatekeeper for crypto companies seeking new bank accounts. This contrasts with a principles-based regulation that would allow individual banks to make their own decisions regarding banking relationships.

Winklevoss also raised concerns about potential future actions under the Biden-Harris administration. He warned that the current regulatory measures are just the beginning and could escalate if Vice President Kamala Harris is elected and Elizabeth Warren remains a Senator. He likened the current enforcement action to the “table setting,” suggesting that harsher actions could follow after the upcoming election.

Winklevoss cautioned that the anti-crypto policies of the Biden-Harris administration could have severe repercussions for the industry if they are maintained over the next four years. The centralization of decision-making by the Fed and the potential for further regulatory actions could stifle innovation and growth within the crypto space. It remains to be seen how the industry will navigate these challenges in the face of ongoing regulatory pressures.