1/ A 🧵ON THE @federalreserve's precedent-setting 86-page @custodiabank order, released on Friday. Custodia just published a blog post highlighting the newly-articulated Fed policies + the procedural abnormalities it reveals. custodiabank.com/press/custodia…
2/ First, the policy items. Here are the first two:
3/ The third is new & raises lots of questions, esp since the Fed appears to have made a significant break from the President's Working Group's recommendation that #stablecoins only be issued by banks. There may be a new "catch 22" here:
4/ Related, there's increasing chatter about the Fed's own #CBDC project in the context of the Fed's actions regarding Custodia:🤔
5/ As I've said in recent interviews I've seen no evidence that the coordinated #crypto crackdown is about clearing the runway of private competitors to a #CBDC. But chatter about the topic is growing louder.
Speaking *personally* a U.S. retail CBDC is a hill worth dying on.
6/ The fourth gets into the role of States in the dual banking system, where both States & the federal govt (the OCC) have equal power to charter banks. The Fed just opened a new chapter in long tug-of-war re: Washington DC's efforts to federalize banking. States may take issue:
7/ The fifth is related--the Fed created a de facto new standard that all Fed member banks must be FDIC-insured (a "critical tool in preventing bank runs"). Hmmm...interesting in light of the bank runs at FDIC-insured banks that unfolded just weeks after the Fed wrote the order🤷♀️
8/ Next is a discussion of the procedural abnormalities--a few of which @custodiabank details in its post. (Here's a live link to the banking law expert's analysis referred to in the screenshot: bankregblog.substack.com/p/four-things-…)
9/ Banks especially may find these noteworthy:
10/ continuing...
11/ Per @custodiabank: "There are many other procedural abnormalities, but the above are likely the ones most relevant to other banks combing the Fed’s precedent-setting order for clues as to how the Fed will approach its future disclosure of confidential supervisory information"
12/ And on the topic of Fed disclosure of confidential supervisory information (CSI), here's what Fed vice chair Barr said just today (!)👇Compare his statement to the magnitude of CSI disclosure in the 86-page @custodiabank order. #WatchWhatIDoNotWhatISay federalreserve.gov/newsevents/tes…
13/ Here's the closing of @custodiabank's blog. "#digitalassets are not going away, and neither is Custodia." As always, thanks for all of your support! 💪
• • •
Missing some Tweet in this thread? You can try to
force a refresh
1/ WE TOOK TERRITORY by issuing the first bank-issued #stablecoin on a permissionless blockchain & it's not what you think. 🧵 below. The real impact is on #tradfi--yes, #crypto took regulatory territory, but #tradfi is the real story in what @custodiabank did w/ @Vantage_Bank.
2/ Background: Fed Governor Waller's #stablecoin speech a few wks ago distinguished btwn "real" dollars & "synthetic" dollars, noting stablecoins are synthetic. Only the Fed + special types of entities legally authorized to take demand deposits can issue *real* dollars. federalreserve.gov/newsevents/spe…
3/ Crypto doesn't care abt that distinction, but to #tradfi that distinction is EVERYTHING. Why? bc tradfi must care about legal, accounting & tax rules. I can't give legal, accounting or tax advice, but when a bank authorized to issue a dollar issues a dollar, it's a dollar.💡
1/ Prime Trust's bankruptcy Plan Admin recommended that its #crypto custody customers--who thought they owned the custodied assets--take a haircut. Amount not clear yet (Celsius custody customers took a 27.5% haircut). These situations were sadly avoidable. courtlistener.com/docket/6769170…
2/ Context: bankruptcy is a process designed to maximize the recovery of assets for a bankrupt company's estate, while a bank's receivership is a process designed to protect a bank customers. When a non-bank fails, it goes to bankruptcy. When a bank fails, it goes to receivership
3/ So, the Prime Trust discussion is only a bankruptcy discussion because Prime Trust wasn't a bank.
Prime Trust went bust and has an asset shortfall, so a bankruptcy judge must decide whether its custody customers will get all their assets back or will take a haircut.
1/ NEW BLOG: "How To Keep The #Bitcoin Strategic Reserve From Morphing Into A Bailout Fund." Did you know SBF publicly advocated for a crypto bailout fund just 1 month before FTX failed? Story 👇Lesson: don’t let future Sams hijack the SBR for a bailout!!! caitlin-long.com/how-to-keep-bi…
2/ In the blog I analyze #bitcoin as a reserve asset (key is its favorable inflation rate differential)--but condition my support for a BSR on drafting legislation w/ 4 specific prohibitions to prevent insolvent-but-politically-connected people from ever using it for a bailout:
3/ The favorable inflation rate differential between #bitcoin & US dollar + strategic benefits make bitcoin worth considering as a reserve asset, but the consensus mechanisms of other #crypto can be too easily changed to permit higher inflation so I don't support including them:
🚨HUGE NEWS on #debanking & #OperationChokePoint2.0: a little birdie told me that @FDICgov Vice Chair Travis Hill just spoke at an ABA meeting & said there is no place at the FDIC for those who explicitly or implicitly supported its debanking initiative. Transcript not avail yet
Travis Hill is a Republican & is vice chairman of the FDIC—has been outvoted by Biden/Warrenites on the FDIC board, but that will change on Jan 20 when Gruenberg steps down.
It'll be soooooooo interesting to see if Hill went off-script. Don't forget Gruenberg's people still control the FDIC (head of comms is allegedly trying to silence online critics of #debanking, so I doubt such remarks would've made it thru official editing of his speech, which should be posted at this site soon): fdic.gov/news/speeches
1/ 🚨THE FED'S DEBANKER-IN-CHIEF IS OUT! Michael Barr, the last remaining Biden/Warren appointee who architected #OperationChokePoint2.0 at a federal financial agency, will resign as vice chair for supervision in Feb (see @nic__carter's March 2023 map👇). federalreserve.gov/newsevents/pre…
2/ It was an open secret in DC that Trump was likely to fire him. He had a terrible, horrible, no good, very bad reign as Fed Vice Chair for Supervision--the WSJ covered only some of why 👇, calling him "a favorite of Elizabeth Warren" but omitting a lot: wsj.com/opinion/a-fede…
3/ Barr siloed information within the Fed, as of Oct 2022 sending Fed supervision staff a memo prohibiting them from talking to other Fed governors unless they’d spoken with him first👇
1/ NEW FACTS REVEALED: 2 years ago today, the Fed quietly hammered 5 banks & thereby kicked off its industry-wide dragnet against banks serving the #crypto industry. @joerogan & @pmarca recently made discussions about #debanking go mainstream, which makes today’s anniv notable.
2/ On the Sunday after Thanksgiving 2022 (11/27/22), the Fed hit the first of these 5 banks w/ regulatory actions targeting their crypto activities, and its blitz carried into the following work week. Thus began what @nic__carter would later dub #OperationChokePoint2.0.
3/ How did I learn these facts? I pieced together public info + info from insiders who came forward & filled in puzzle pieces for me. I know the 5 banks’ names but won’t disclose them here. Publicly-available info confirms @custodiabank was one of them.