Former Obama Solicitor Accuses Regulators of Crypto ‘Debanking’ Strategy

• Bipartisan legal support for Custodia Bank signals shifting political winds favoring crypto.
• Federal regulators accused of deliberate efforts to restrict banking access for crypto firms.
• SEC’s aggressive stance against major crypto firms exacerbates regulatory uncertainty.

The landscape of cryptocurrency regulation in the United States is undergoing significant shifts, particularly with the involvement of high-profile legal figures such as Donald Verrilli and Paul Clement.

Verrilli, a former Solicitor General under President Obama, and Clement, who held the same position under President Bush, are uniting to support Custodia Bank in its legal battle against the Federal Reserve. This collaboration signals growing bipartisan support for the crypto industry as the November elections approach.

Verrilli has criticized federal regulators, accusing them of a deliberate campaign to cut off banking services to the digital asset industry. He argues that despite the industry’s need for banking services, regulatory actions have systematically limited access. This sentiment was echoed in a communique co-authored with Clement, where they highlighted the Office of the Comptroller of Currency’s (OCC) informal guidance to banks, which significantly limits their ability to engage with crypto firms.

The legal tussle between Custodia Bank and the Federal Reserve centers on the latter’s refusal to issue a Master Account to the former. While the immediate ruling favored the Federal Reserve, Verrilli and Clement suggest that the battle is far from over, implicating the OCC in the broader strategy to hinder the crypto industry.

The stringent conditions imposed on banks for dealing with crypto firms pose formidable challenges for an industry characterized by rapid innovation. As noted by Ryan Selkis, founder & CEO of Messari Crypto, this development isn’t receiving enough recognition given the news backdrop, but it’s significant.

Moreover, the broader regulatory landscape for crypto in the U.S. remains challenging. The Securities and Exchange Commission (SEC) has been particularly aggressive, filing lawsuits against major firms like Coinbase, Ripple Labs, Uniswap, and ConsenSys. Despite Coinbase’s pushback , the SEC continues its regulatory actions, raising concerns about the uncertain future for crypto exchanges and related entities.