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Bigger Players Are Entering the Cryptocurrency Space
Traditional banking's interest in digital currency may reduce regulatory scrutiny, improving conditions for innovation among small crypto companies.
Anna Lad & Robert Baron
June 28, 2023
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Banking News
Third-party Error Costs JPMorgan $4M
JPMorgan will pay the Securities and Exchange Commission (SEC) $4M for deleting 47M emails before the 3-year legal retention period was over. A third party’s effort to delete communications from over four decades ago led to the ‘coding error.’ Deleted content is presumed to include retail-banking information related to Chase from the first four months of 2018. The costly mistake, which was the result of a “troubleshooting exercise gone wrong,” led to the creation of explicit coding to prevent future data destruction.
Customers Bank Acquires $631M Signature Bank Portfolio
Pennsylvania-based Customers Bank paid the FDIC 85% of book value for the portfolio, worth $631M. It also hired 30 bankers which had experience originating the loans. The bankers are distributed across the United States and in a variety of sectors, including life sciences and technology. The acquisition aligns with the bank's goal of strengthening its deposit franchise and diversifying its business model. It’s just one example of a bank benefiting from other banks’ failures in spring 2023.
Sam Sidhu, CEO of Customers Bank, said:
This loan pool purchase was extremely attractive to us considering the historical customer deposit-to-loan ratio in this vertical of over 2 to 1.
Credit Unions
NCUA Drops Covid-Era Guidelines
The National Credit Union Administration (NCUA) has rolled back pandemic-related regulations for credit unions following the end of the COVID-19 public health emergency declaration. The NCUA reviewed and archived guidance that is no longer applicable or necessary, notifying state supervisory authorities of the changes. The decision was made considering the national COVID-19 emergency is over and risks from the disease no longer pose a profound risk to the public.
FSGG Draft Bill Requires Changes, Says CUNA
The House Appropriations Subcommittee on Financial Services and General Government (FSGG) released its FY24 draft bill, which includes funding for the Consumer Financial Protection Bureau (CFPB) and proposes changes such as replacing the single director with a five-member commission. The bill also reduces funding for the Treasury's Community Development Financial Institutions Fund, a move criticized by the Credit Union National Association (CUNA) that supports the CFPB reforms but calls for increased funding for the CDFI Fund and the Financial Crimes Enforcement Network. It includes provisions to prohibit certain actions by the CFPB, FinCEN, and the Federal Housing Finance Agency, and opposes the establishment of a U.S. Central Bank digital currency or discontinuation of paper currency.
Jim Nussle, the President/CEO of CUNA, stated:
[The] Treasury’s Community Development Financial Institutions Fund…is an extremely good use of federal funds, as it leverages those dollars into real differences for communities. We’re disappointed Congress would propose a nearly $46 million cut at a time when communities are struggling.
Financial Services & Blockchain
Deutsche Bank’s Crypto Foray Benefits Industry
Members of the American cryptocurrency industry, specifically “crypto-native companies,” may be able to stop worrying about enforcement from the Securities and Exchange Commission (SEC) now that big financial players express interest in crypto. The SEC may view Deutsche Bank’s application to operate a crypto custodian with less suspicion than it would at crypto startups. The bank’s move is no secret. Deutsche Bank’s plans were announced almost three years ago in a report at the 2020 World Economic Forum.
No Asset Freeze, Thanks to SEC-Binance Deal
United States customers of Binance, the cryptocurrency company whose assets could have been frozen by the Securities and Exchange Commission (SEC), will retain access to their funds. Total assets from Binance’s US division amount to $377M U.S. dollars and $2.2B in cryptocurrency. Legal action from the SEC against Binance founder Changpeng Zhao will continue unhindered. Current publicity statements from the cryptocurrency platform deny any financial misconduct and decry the SEC’s fraud allegations as false. The antipathy between the SEC and Binance highlights what crypto supporters consider a larger narrative of regulator distrust and intentional attempts to “kill the crypto industry.”
The director of the SEC’s Division of Enforcement, Gurbir S. Grewal, announced that:
We have ensured that U.S. customers will be able to withdraw their assets from the platform while we work to resolve the alleged underlying misconduct and hold Zhao and the Binance entities accountable for their securities law violations.