Thread by @CaitlinLong_

1/ THREAD ABT REGULATORY NEWS in #crypto, which I’ve been chronicling on twitter since April. Seems crackdown has begun. I dunno how it'll turn out but:
* it won't impact #BTC #ETH etc directly. Base layers will keep addin' blocks
* it'll impact intermediaries & US$ access points

2/ Today was a key event that few in #crypto were probably watching, but it REALLY matters: the comment period ended for the Fed’s proposed payment system access guidelines. See comment letters here (including @AvantiBT’s 18-page tome--awaiting upload): federalreserve.gov/apps/foia/View…

3/ Why does it matter? Fed guidelines are partly aimed at #crypto (despite not mentioning crypto even once). Given what’s happening w/ US$ #stablecoins, the guidelines are esp relevant (see WSJ story last wk-FSOC wants Fed to regulate stablecoins per “ppl familiar w/discussion”)

4/ So what are the guidelines? They set principles for depository institutions to be able to access the Fed & its US$ services directly.

**I'VE BEEN WORKING TO OPEN UP DIRECT ACCESS FOR OUR INDUSTRY SINCE 2018.**

Yep, playing the long game.🤠

5/ Why does such direct Fed payment system access matter? Let’s go back to first principles. Many start-ups in our industry were de-banked in Fall 2017 when banks did mass closures of bank accts connected to #crypto. Didn’t matter whether biz was legit or scam--all were de-banked

6/ Media often disparage our industry over “cat & mouse chase” for bank accts but EVERYONE in our industry faced it. Sadly,having durable bank relationships was often THE deciding factor for whether a start-up made it. A trade assn that only touched US$,not #crypto,faced it too🤦‍♀️

7/ As I’ve said many times, our industry wouldn’t have the success we do if Silvergate & Signature hadn’t stuck with us then, likely incurring higher regulatory costs for doing so. But de-banking is still a risk today--even @coinbase listed it as a risk in its IPO prospectus.

8/ And our industry is growing fast--it needs LOTS of US$ deposit capacity. It’s impt 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.

9/ It’s also abt being responsible to keep our own banking access, not being at whim of a faceless manager somewhere. While most fintechs don’t need to worry abt being de-banked, memories of 2017 still cause EVERY #crypto co to diversify w/ multiple bank relationships,even today.

10/ Again, our industry is getting big--needs more banks that understand how to manage banking us in a safe & sound way. But there's a risk issue too--right now, there's forced separation between banking & #crypto servicing.

Ironic, since this forced separation CREATES risk.🤦‍♀️

11/ Yep, forcing separation of US$ banking from #crypto servicing into a bank vs a non-bank CREATES risk for both, where it wouldn’t otherwise exist. Our 18-page comment letter goes into painful detail to explain this, focusing esp on resulting risks to the Fed’s payment systems.

12/ If you read it, pls understand Fed’s #1 job isn’t monetary policy--it’s protecting pymt systems against loss. Hence the focus of our letter. It’s also a key reason why #Wyoming #SPDI banks are structured as they are--to minimize pymt system risk for banks that handle #crypto.

13/ I’m a proud “plumber”🪠 of both the #crypto & trad financial systems & @AvantiBT’s amazing team is deep in weeds on these issues. We’re building core industry infrastructure--not only for the crypto industry, but also for the trad payment system’s interface with crypto too.

14/ It’ll be fascinating to see how the Fed handles all this. Of course, the banks want the Fed to block access for anyone who’s not in their club.🥱#Fintechs want payment system access w/o paying the costs of becoming banks.🤔And, by design, #Wyoming #SPDIs thread the needle.🤠

15/ #Wyoming #SPDIs qualify for payment system access while also paying the full freight that banks must pay to gain access, & w/o trying to gain access on technicalities & lower capital & supervisory requirements. Were full-fledged depository institutions, just like trad banks.

16/ Our letter details how #crypto cos obtain US$ banking today. None have it w/ Fed directly. Some qualify for their own US bank accts; all others must go indirect via offshore #eurodollar banks or via multi-layered fintech-to-fintech-to-bank arrangements (hence, layers of fees)

17/ This isn't ideal for either #crypto companies or the Fed itself. Fed can’t monitor latent risks to the payment system, & crypto cos must pay layers of fees + face lack of reliable banking access. And then there’s settlement risk, which I detailed here
forbes.com/sites/caitlinl…

18/ There are HUGE differences in settlement speed & irreversibility btwn #crypto & US$, which creates bank run risk for banks handling crypto. The issue isn’t #Bitcoin, #Ethereum or other crypto protocols--they’re just fine.💪The risk comes from the banks’ operational processes.

19/ As a reminder, I agree w/ @nickszabo4: ”Liquid markets are helpful but not absolutely necessary to this core function [#storeofvalue].”

Liquid mkts are nice for #BTC but an on/off-ramp is all that's really needed. US$ access matters (even to maxis).

https://twitter.com/CaitlinLong_/status/1404282827122757633?s=20

20/ With this in mind, it’s important to understand the history of the #Wyoming #SPDI charter. Originally it was proposed as a mutual bank, owned by its members, in keeping with the ethos of #Bitcoin. The Wyoming legislators wanted it to be for-profit & changed that.

21/ There’s a lot more history to #Wyoming #SPDIs that I won’t go into now. Maybe it will all come out someday. Already there’s enough to fill a book about this journey to date. But we have bigger priorities right now. Storytelling can wait until we know how it all ends!

22/ Special shout-out to @AvantiBT’s amazing team & shareholders + our supporters who have pledged to be with us for this whole journey. Same goes for @krakenfx & WDTFinancial, both of whom are chartered #SPDIs & also waiting for Fed pymt system access...

23/ ...+ the many other #crypto cos watching to see if Fed opens up this pathway so others can follow. We’ll know soon. Special shout-outs to @GovernorGordon, @SenLummis, Gov Mead & entire #Wyoming legislature who made it possible. A lot is riding on Fed’s decision. Let's roll!🤠

PS -- link to our comment letter is here: avantibank.com/press/avanti-s…