1/ I'VE BEEN THINKING about Fed Gov Waller's Tuesday speech introducing "skinny Fed master accounts" for payment-only banks. (This is what @custodiabank proposed to the Fed in June 2020, but I digress.) This 🧵discusses implications for the banking system.
federalreserve.gov/newsevents/spe… 2/ I've previously predicted the bank trade associations will litigate the question of whether it's legal for trust companies to engage in deposit-taking activities (more on this below).

But, previously, I also asked a question--if the banks can't beat 'em, why not join 'em?

1/ DIGGING THRU Trump's #debanking executive order--it contains some hidden gems!!! The first one is a doozy--shows the @WhiteHouse understands it can't trust the federal banking regulators: It brought in an overseer to keep 'em honest (with good reason!).
whitehouse.gov/presidential-a… 2/ The overseer👇: SBA, a *non-bank* regulator. This speaks volumes: POTUS understands the abuses of power that gave rise to #debanking run deep in the agencies. Look up the political contributions of Fed & FDIC staff--they lean heavily Dem (eg, Fed staff gave 92% to Dems in '24)

1/ MILESTONE ACHIEVED--a tokenized dollar (AvitTM) issued on a permissionless blockchain was used Friday *within the banking system* to make cross-border US dollar payments. @custodiabank & @Vantage_Bank teamed up to do it for Mexico-based trucking & logistics company, DX Xpress.

https://twitter.com/custodiabank/status/1919459195792855388

2/ It was a pleasure to watch DX Xpress transact--it's a tech-focused trucking co. whose CEO's goal is to be able to pay truck drivers programmatically *within an hour* of delivering goods to their destination. Stablecoin tech is the only way to do that so fast & cheaply today.

1/ I'VE BEEN THINKING about why the Fed left in place one of its anti-#crypto statements while rescinding all 4 others. The one it left in place was issued in coordination w/ the Biden White House's anti-crypto statement on January 27, 2023. Link here:
federalregister.gov/documents/2023… x.com/CaitlinLong_/s… 2/ The Jan 27, 2023 guidance left in place by the Fed does many things, but here are the keys:
a. blocks banks from touching cryptoassets as principal, even in a tiny amount to pay gas/transaction fees,
b. blocks banks from issuing #stablecoins on permissionless blockchains +👇

@nic__carter @PirateWires 😲 @nic__carter @PirateWires THIS BOMBSHELL HAS BEEN AN OPEN SECRET in Washington for quite a while--so much so that it wasn't really a secret anymore. *FINALLY* someone put it in writing:

🚨**Elizabeth Warren had de facto control over Biden's economic & financial regulatory team.**

Historians, have fun...

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…

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

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:

🚨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.

👀 @nic__carter @CampbellJAustin @iampaulgrewal @vronirwin

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…

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.

1/ HOW TO FIX THE U.S. DEBANKING PROBLEM, a 🧵by someone who set out to solve it but ended up repeatedly targeted by it (+ whose bank has a lawsuit against the Fed pertaining to it).

This is a #MeToo-type moment in banking, as stories are now pouring out.

How to fix it? 2/ As @pmarca alluded on @joerogan, the levers of power used/abused by federal bank regulators to effectuate #debanking are subtle & insidious. Multiple attempts have already been made to fix the problem. Why did they all fail? bc it's a multi-faceted problem that runs deep.

1/ CALLING OUT A DOUBLE STANDARD: I chewed on @CampbellJAustin's great🧵about selective enforcement against #crypto while protecting #tradfi, which prompted me to review the FTX fraud. Lo & behold, there seems to be ANOTHER pattern of selective enforcement

https://x.com/CampbellJAustin/status/1840077023433093517

2/ The FDIC's Inspector General disclosed that 11 US banks "may have had involvement in alleged wire transfer fraud," & I tweeted the below screenshot of it on February 22, 2023:

https://x.com/CaitlinLong_/status/1632258328322625536

1/ I'M STILL THINKING abt the bombshell Silvergate court filing. Here's the Warren crowd's #crypto bank scorecard:
❌Silvergate--suicided
❌Signature--suicided
❌Protego--OCC approval "expired"
〰️Paxos--ditto, but its non-bank is still going
✅ @custodiabank--survived & fighting 2/ Until the court filing, I didn't know the Fed "suicided" Silvergate by forcing it into an untenable choice👇: make #crypto <15% of its deposits (impossible in a short period of time) or throw in the towel. This touched off a bank panic the next day, costing the FDIC ~$40bn.🤦‍♀️

1/ I DUG INTO the Fed's latest master account list, released last night. The big news is what's happening with OCC-chartered trust companies--2 new ones applied for Fed master accounts. This is noteworthy for several reasons, explained below. Data here: federalreserve.gov/paymentsystems… 2/ But first, among the ~430 Fed master account holders that are not FDIC insured (or equivalent), 11 are trust companies chartered by the OCC:

🚨 1/ BOMBSHELL REVELATION that Silvergate was liquid & solvent when the Fed forced it to close changes EVERYTHING when analyzing the March 2023 bank failures. Look at the dates:
* Mar 8: Silvergate voluntarily liquidates
* Mar 10: Silicon Valley fails
* Mar 12: Signature fails 2/ Stop & think about that timeline.

Think.

Would Silicon Valley Bank have failed had Silvergate not been forced by the Fed to close just 2 days earlier?

Recall the bank run at Silicon Valley really got started on Mar 9--the day after Silvergate announced it would liquidate.

DID I JUST SEE US GET SEN KELLY FROM AZ, @twobitidiot ??? 🙌 AND HICKENLOOPER OF CO!!!

Peeps—all these Dems are rejecting @ewarren & crossing the Biden White House. This is more than I’d expected. PEAK WARREN IS OVER!!!

QUIET PART OUT LOUD: they're rightly worried abt Hong Kong via USD stablecoins becoming a hub for USD clearing that's outside US's reach, while the US dithers. But it's not just HK. Obvious fast path for Milei to dollarize Argentina is via USD stablecoins.
ft.com/content/39f101… 2/ 👇But the US (under Sen Warren's control of the Biden Admin's financial svcs policy) is blocking everyone working on regulatory-compliant USD stablecoins, while letting big banks continue to build their own versions.😡 But the world already blew past the walled-garden versions

1/ OH BOY...#PrimeTrust's failure just took a BIG turn--its receiver today filed to put it into voluntary Chapter 11 (federal bankruptcy). I was afraid for Prime Trust customers of this very outcome & discussed why in the debate w/ @mikebelshe on @zGuz's podcast last month. 2/ In that debate, I laid out why banks as legal entities better protect customers than state-chartered trust companies in the event of failure--bc the federal bankruptcy process is designed to bring assets into the estate, while bank receivership is designed to protect customers

1/ 🚨ON THE DAY #FedNow is scheduled to launch, I noticed something...interesting, shall we say. 🤔Among the list of banks & credit unions in the Fed-authorized 1st group of participants is a #fintech--& it's a European fintech, not even an American one. So I went digging... 2/ But wait, you're thinking, how does a #fintech even have a Fed master account so it can qualify to clear US$ payments at the Fed--isn't the Fed keeping #fintechs out???

Yes, yes it is--except for certain fintechs. Europe lets its fintechs qualify for special bank charters.

1/ BIG NEWS for #fintech! A sixth US state--Idaho--is willing to charter uninsured, non-lending, 100% reserve banks that are eligible for Fed master accounts (the other states are CT, ME, NE, VT & WY). This trend could turn the "bank-as-a-service" (#BaaS) model on its head!!!!! 2/ The revelation was buried deep in the Fed's master account database (which Congress had to force the Fed to release--which it did late on a Friday afternoon before the Juneteenth 3-day weekend. Hoping no one would see it???) It's a #GiftThatKeepsGiving.
federalreserve.gov/paymentsystems…