A faction of Washington, D.C. regulators is apparently considering a move to tighten the vice on digital assets that could – if implemented – perversely incentivize unregulated crypto activity in the U.S.
the worst-case scenario, in which the FFIEC adopts the proposal too, could render money transmitter licenses inapplicable to crypto intermediaries.
Connecting the dots: if the capital-light money transmitter licensing regime doesn’t work anymore, U.S. crypto intermediaries would need to become licensed as something else – and would become subject to far higher capital requirements. To cover the cost of that capital, they would need to charge customers more.
It’s also far from clear that the door is even open for crypto intermediaries to become licensed as banks, trust companies or broker/dealers, especially at the federal level.crypto custodians that also provide crypto lending services for custody clients could end up with a double capital charge under the possible new rule: one for the loan and another for the custody asset..
If the possible rule is enacted and the worst-case scenario actually happens, U.S. crypto companies would likely enlist their ~40 million U.S. customers to start lighting up Congress again, just as they didin the summer of 2021 when the infrastructure bill included a proposal that was similarly serious.
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