Federal Reserve Takes Enforcement Action Against Customers Bank Digital Assets

There are solutions that would help to address that concentration, but so far regulators are not keen. One is to allow some of the crypto banks, such as Custodia, to have a Federal Reserve account. Alternatively, if the instant DLT payments didn’t have to happen within the same bank, then digital asset clients could be spread across the broader banking sector.

For more than two years, Tassat and the USDF Consortium have been trying to launch separate interbank tokenized payment networks, not targeted at crypto clients. Customers Bank was one of three banks involved in the unveiling of Tassat’s Digital Interbank Network (DIN). So far the regulators are not supportive.

Hence, the digital asset concentration will likely persist. The degree of attention banks receive for digital asset activities means most banks won’t be interested unless they decide to make it a focal activity. That means the pool of supportive banks continues to shrink.

There are two very different perspectives on what’s happening. The digital asset world considers this as de-banking. And view central bankers as threatened by crypto innovations. Central bankers will argue they’re just making sure the banks are managing risks.

Globally, central bankers consider the volatility of digital assets as a potential financial stability risk to the traditional financial system. The reason it is ‘potential’ is the limited interconnectivity between the two worlds. Theoretically, the crypto markets should become less volatile as they mature.

One could argue that the central banks are trying to hold back the tide. Using a summer analogy, perhaps the central banks are trying to delay things enough so the tides are like tepid Mediterranean ones rather than scary Atlantic ones.