• President Joe Biden is encouraging federal banking regulators to tighten rules for regional banks.
• This includes requiring them to maintain a higher level of easily accessible assets that can be quickly converted to cash in times of financial stress.
• Changes in banking regulations could impact the crypto industry, which is seeking greater legitimacy and integration with traditional financial systems.
Biden Encourages Federal Banking Regulators to Tighten Rules
President Joe Biden has stepped up pressure on federal banking regulators to require institutions like Silicon Valley Bank to maintain a greater amount of liquid assets while undergoing more frequent stress tests. The goal of this action is to enhance the stability of the financial system and prevent market-wide disruptions caused by bank failures.
Impact on Crypto Industry
Changes in banking regulations can have an impact on the crypto industry, which is currently seeking greater legitimacy and integration with traditional financial systems. As these regulations can be amended swiftly without the necessity of introducing new laws, it means that any changes could have an immediate effect on the industry.
The Closure of Silicon Valley Bank
The California Department of Financial Protection and Innovation ordered the closure of Silicon Valley Bank this month due to its inability to manage funds properly after many depositors withdrew money using online platforms, resulting in a one day loss of $42 billion.
Changes Made By Trump Administration
In 2018, the Trump administration loosened oversight of regional banks through a bipartisan bill, changing their maximum size from $50 billion to $250 million in total assets before they must adhere to stricter regulation from the Federal Reserve Board’s Enhanced Prudential Standards (EPS). However, with President Biden now pushing for tighter rules again it could mean that regional banks are subject to stricter regulations once more.
The White House announced these changes on Thursday and they can be implemented by current bank regulators without needing new legislation. It remains unclear what kind of impact this will have on crypto businesses but it’s clear that both industries are closely intertwined and any alterations made by banks will affect crypto companies too