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Co v er St o r y
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Add to that the FDIC's shuttering of three Taking innovation offshore
banks serving the crypto market, one of Eric Brown, CEO at CryptoBucks and chairman of the
which (Signature) was actually ETA's crypto and blockchain committee, said the biggest
solvent—and doing so at great cost (that challenge to the crypto marketplace, at least in the United
States, is the lack of established rules and regulations. "Not
is, covering billions of dollars in deposits having a regulatory framework is really tough," he said.
that didn't qualify for deposit
insurance)—and a pattern emerges. CryptoBucks, a unit of south Florida-based Alliant Pay-
ments, developed a payment app that supports credit,
debit and crypto payments that showed promise early on,
especially when it signed an acceptance deal with the Mi-
"The shutting down of these banks that had direct pipe- ami Dolphins football team in 2019. But regulatory uncer-
lines into the crypto world has halted every other banks' tainty in the United States led CyberBucks to look to other
forays into crypto," said James Huber, an attorney and markets.
partner at Global Legal Law Firm. Huber and others char-
acterize the current regulatory stance on crypto as Choke "There are tons of opportunities out there," Brown said,
Point 2.0, referencing previous efforts by regulators to cur- adding that the company has been licensed already by the
tail banking relationships. European Union, and markets in Africa, South America
and Asia also look promising. "We plan to battle-test the
Operation Choke Point was a federal government pro- product in emerging markets," Brown said. Then once reg-
gram that ran between 2011 and 2014. Its intent was to ulators get their acts together in the United States Crypto-
choke off access to the banking system by certain types Bucks will move back onshore, he predicted.
of businesses. In all, bank regulators listed 30 merchant
categories that regulators decided were off limits to banks, Pruss isn't surprised. "When it comes to innovation in
and by extension, merchant acquirers. These included gun the payments industry, the U.S. always seems to be the
shops, pawn shops, payday lenders and porn websites. last to adopt," he said, citing the protracted migration to
EMV chip security in the United States for credit and debit
The program was eventually challenged in court, led by cards. "But it's coming," Pruss insisted.
lawyers from the Washington, D.C. law firm Cooper &
Kirk. Now those lawyers are taking on regulators again. Sondhi is skeptical that there's a place for crypto at the
"Businesses in the cryptocurrency marketplace are losing retail POS. "It's really not practical," he said. "Besides, con-
their bank accounts, or their access to the ACH network, sumer payments work really well in the U.S."
suddenly, and with no explanation from their bankers,"
the firm wrote in a recent opinion paper. That has not kept Mastercard and Visa from dabbling in
crypto. Each has initiatives underway involving stable-
Add to that the FDIC's shuttering of three banks serving coins, which are cryptocurrencies pegged to stable assets,
the crypto market, one of which (Signature) was actually like the U.S. dollar. Both also support crypto-linked credit
solvent—and doing so at great cost (that is, covering bil- and debit cards, which convert crypto into fiat currency at
lions of dollars in deposits that didn't qualify for deposit the point of payment.
insurance)—and a pattern emerges, the lawyers suggested.
"We continue to partner with crypto companies that im-
"Past performance may not always be indicative of future prove fiat on and off ramps as well as progress on our
results, but what the federal bank regulators have tried to product roadmap to build new products that can facilitate
get away with in the past is, it would seem, highly similar stablecoin payments in a secure, compliant and conve-
to what they are trying to get away with today," Cooper & nient way," Cuy Sheffield, vice president and head of cryp-
Kirk wrote. to at Visa, blogged in early March. "Despite the challenges
and uncertainty in the crypto ecosystem, our view has not
And as it did with Operation Choke Point, Cooper & Kirk changed that fiat backed digital currencies running on
argued that "Operation Choke Point 2.0" is unconstitution- public blockchains have the potential to play an important
al. "The persistent unwillingness of the nation's bank reg- role in the payments ecosystem."
ulators to follow the law and obey the Constitution calls
out for congressional action," the lawyers insisted. A few days later, in a press release announcing a crypto-
linked debit card for Lithuania, Sheffield said Visa wants
Sam Bankman-Fried, FTX's CEO, "showed us that when to be "a bridge between the crypto ecosystem and our
money is not regulated, terrible things happen," said Vijay global network of merchants and financial institutions."
Sondhi, CEO at NMI. "What we've seen with FTX is that Assessing blame
there's a need for regulation, and there needs to be over-
sight, with risk management reporting to boards, not to Chris Aliotta, CEO at Quantalytix, a Birmingham compa-
CEOs." ny that developed a cloud platform community banks use

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