Caitlin Long takes aim at The New York Times over crypto ‘alarm’ article

Avanti Bank and Trust CEO Caitlin Long has posted a rebuttal to a recent New York Times article claiming that crypto and decentralized finance is “disrupting the banking industry” so fast regulators can’t keep up.

Disrupting traditional finance is exactly what crypto and DeFi aspires to do, but the piece titled “Crypto’s Rapid Move Into Banking Elicits Alarm in Washington” published on Sept. 5 had a number of inaccuracies and omissions according to Long.

The primary argument of the piece — using DeFi startup BlockFi as an example — was that crypto derivatives and highly leveraged products have become a nightmare for regulators which are scrambling to catch up. High-stakes speculation is leaving investors vulnerable to major losses according to the NYT.

But Long stated that the issue is not black and white and suggested that “anti-crypto forces” are constantly trying to paint the entire industry with the same brush. “Bad actors deserve to be called out, but the article ignores the fact that regulatory-compliant firms exist,” she added.

Long took particular issue with the fact that the article failed to mention that fully regulated crypto banks already exist, such as her own Wyoming-based Avanti, which launched in October 2020.

She stated that Wyoming’s special bank charter does not allow “cryptocurrency deposits.” Regulated banks can provide custody services for crypto, she continued to explain, but cannot take deposits in anything except fiat currency.

“Article misses that critical point — it’s a firewall protecting Fed’s payment system from exposure to anything other than $ [USD].”

The article also pointed out that many crypto intermediaries have introduced some of the “bad behavior” from traditional finance such as extreme leverage without requiring a capital buffer. These are fair criticisms, according to Long, who has previously cautioned about leverage, adding that very fe crypto intermediaries, such as brokers or third parties acting between the bank and the blockchain, disclose information about their reserves.

Related: ‘Bitcoin is not an asset that is designed to be leveraged,’ says Caitlin Long

Long stated that DeFi platforms in particular do a far better job with transparency than crypto intermediaries or traditional banks which remains one of its best attributes. Banks settle their books once a day while crypto is settled in minutes, and for that reason, the Avanti Bank CEO concluded:

“Regulated banks that handle crypto need to be in a straightjacket. That’s the only safe & sound way to integrate the crypto & traditional systems.”

Vehemently anti-crypto U.S. Senator Elizabeth Warren was still on the warpath this week when she labeled the entire cryptocurrency industry the “new shadow bank” as reported on Sept 7. She expressed particular concerns over stablecoins and their apparent lack of transparency regarding reserves.


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Crypto crackdown targeting USD access points has begun: Caitlin Long

Caitlin Long, the founder and CEO of the pioneering bank for the crypto sector, Avanti Bank & Trust, has declared that the regulatory crackdown on crypto “has begun.”

In a lengthy tweet on July 13, the Wall Street veteran highlighted her thoughts on the current regulatory situation in the U.S., predicting that authorities will not target Bitcoin and Ethereum directly, instead opting to go after “intermediaries” and “access points” for U.S. dollars into the sector.

“The issue isn’t Bitcoin, Ethereum, or other crypto protocols, they’re just fine. The risk comes from the banks’ operational processes.”

She also noted that July 13 marked the “key event” in which the comment period for the Federal Reserve’s proposed payment system access guidelines ended, arguing that the Fed’s guidelines were partially aimed at cryptocurrencies despite not mentioning the asset class directly.

The guidelines, proposed on May 5, outline the system that the central bank will use to evaluate requests to access the agency’s financial services. The proposal comes amid growing requests from fintech firms and financial institutions and providers to gain access to the payments system.

Caitlin emphasized the importance of ensuring crypto firms are able to gain direct access to master accounts with the Federal Reserve, citing an example from 2017 when a number of banks carried out mass closures of bank accounts connected with crypto, stating:

“Didn’t matter whether biz was legit or scam–all were de-banked.”

Long emphasized that the same risks remain today, noting that leading U.S. exchange, Coinbase, had expressed the same concerns in its IPO prospectus.

“It’s important for our industry that law-abiding companies can gain direct US$ access on our own. It’s not just about cutting out layers of fees that many in our industry are incurring just to get US$ access,” she said.

Related: Will regulation adapt to crypto or crypto to regulation? Experts answer

Avanti, which received a bank charter in Wyoming in October 2020, has submitted its own 18-page comment letter emphasizing its concerns with the Fed’s proposed legislation.

Long, who co-founded Wyoming Blockchain Coalition in 2017, was instrumental in establishing Wyoming’s permissive regulatory apparatus regarding crypto firms.