Avanti Bank and Trust CEO Caitlin Long has published a rebuttal to a recent New York Times article claiming that crypto and decentralized finance are “disrupting the banking industry” so fast that regulators can’t keep up.
Disrupting traditional finance is exactly what cryptocurrencies and DeFi aspire to do, but the article titled “Rapid shift from cryptocurrencies to banking raises alarm in WashingtonPosted on September 5, it had a number of inaccuracies and omissions according to Long.
The main argument of the article, using DeFi’s startup BlockFi as an example, was that crypto derivatives and highly leveraged products have become a nightmare for regulators struggling to catch up. High-risk speculation is leaving investors vulnerable to major losses, according to the NYT.
But Long claimed that the problem 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 denounced, but the article ignores the fact that there are companies that comply with the regulations,” he added.
1 / @New York City Times history in #crypto/#banking deserves a thoughtful answer. The problem is not black and white: anti-crypto forces are trying to paint us all with a wide brush. Bad actors deserve to be denounced, but the article ignores the fact that there are companies that comply with the regulations. https://t.co/IUYTctBGfV
– Caitlin Long (@CaitlinLong_) September 5, 2021
Long had a particular problem with the fact that the article did not mention that fully regulated crypto banks already exist, such as his own Wyoming-based Avanti, which launched in October 2020.
He stated that Wyoming’s special banking statute does not allow “cryptocurrency deposits.” Regulated banks can provide cryptocurrency custody services, he went on to explain, but they cannot receive deposits in anything other than fiat currency.
“The article misses that critical point: It is a firewall that protects the Fed’s payment system from exposure to anything other than $ [USD]. “
The article also noted that many crypto brokers have introduced some of the “bad behavior” of traditional finance, such as extreme leverage without requiring a capital cushion. These are fair criticisms, according to Long, who previously warned of leverage, adding that very few 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 designed to be exploited,’ says Caitlin Long
Long claimed that DeFi platforms in particular do a much better job with transparency than crypto brokers or traditional banks, which remains one of their best attributes. Banks settle their books once a day while cryptocurrencies settle in minutes, and for that reason, the CEO of Avanti Bank concluded:
“Regulated banks that handle crypto must be in a straitjacket. That is the only secure and robust way to integrate crypto and traditional systems. “
Vehemently anti-crypto US Senator Elizabeth Warren was still on the warpath this week when she labeled the entire crypto industry the “new shadow bank,” as reported on September 7. He expressed particular concern about stablecoins and their apparent lack of transparency regarding reserves.