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Crypto Firms Want Access to Fed Payments Systems, Banks Are Resisting

By on August 28, 2021 0

WASHINGTON — Cryptocurrency companies want to tap into Federal Reserve payment systems that traditional banks use to move money quickly. The banks are retreating.

The companies include Avanti Bank, which aims to provide custodial services to institutional investors in cryptocurrencies, and Kraken, a cryptocurrency exchange. They say direct access to the Fed’s payment systems would allow them to process orders from customers buying and selling digital assets faster and more cheaply. Currently, they have to partner with traditional banks that have accounts with the Fed.

Traditional banks say new financial firms are relatively lightly supervised and lack the internal controls necessary to combat money laundering and other illicit activities. And they say businesses are riskier because they are not insured by the Federal Deposit Insurance Corp.

“It is reasonable to expect these applicants to pose increased risks in terms of anti-money laundering, cybersecurity and consumer protection, as well as security and soundness,” the Bank Policy Institute, which represents the major banks, and Independent Community Bankers. of America wrote in a letter to the Fed last month.

Avanti and Kraken, both of which have “special purpose” banking charters in Wyoming, say they all have the same compliance, oversight, and oversight requirements as traditional banks. The only US banking regulator that has a supervisory review manual for crypto is in Wyoming, they say.