Fed Clamps Down On Crypto-Friendly Customers Bank – What About The Democratic 'Reset'?

A growing number of Democratic leaders have recently been turning toward the cryptocurrency industry, but on Thursday, the Federal Reserve announced an enforcement action against digital assets-friendly Customers Bank.

The latest development raised questions about the reported "reset" that some Democrats are pushing to draw the Party, particularly Democratic presidential candidate Kamala Harris, closer to the crypto industry.

Fed announces enforcement action on Customers Bank

Just weeks after the group of Democrats urged the DNC to adopt a "forward-looking" approach toward digital assets, the Federal Reserve announced an enforcement action on Customers Bancorp Inc., which offers crypto-related services.

The U.S. central bank said Thursday that its recent review of Customers Bank "identified significant deficiencies related to the Bank's risk management practices and compliance with the applicable laws, rules, and regulations relating to anti-money laundering ('AML'), including the Bank Secrecy Act."

Issues were also allegedly identified in terms of compliance with regulations under the Office of Foreign Assets Control (OFAC) and the AML requirements of Regulation of the Board of Governors.

Customers Bank agrees to furnish written plan

According to the Fed, Customers Bank has agreed to provide a written plan that includes planned actions on improving digital asset operations supervision, measures to ensure BSA/AML requirements compliance, and actions to enhance oversight of the bank's crypto activities among others.

Following the announcement's publication, Rep. Nickel's statement about Democrats' supposed push for a "reset" with the crypto industry has come into question.

Democrats are pushing a 'reset': Congressman

Democratic Rep. Wiley Nickel of North Carolina revealed during the Bitcoin 2024 conference last month in Nashville that Democrats who have seen the potential of the crypto sector have been "working hard to get a reset from the Vice President."

He was referring to the public perception that the Biden administration has had a negative viewpoint on cryptocurrencies. The said notion was acknowledged by more than a dozen Democrats in a letter to the Democratic National Committee (DNC) wherein they said the U.S. Securities and Exchange Commission's (SEC) "previous hostility" to the sector didn't reflect the Party's values on inclusivity and progress.

The reset is a 'scam'?

Tyler Winklevoss, who co-founded the Gemini crypto exchange with his twin, Cameron, took to X Thursday, questioning the legitimacy of the Democratic Party's "reset" plan.

"Today, the Fed confirmed that Operation Choke Point 2.0 remains in full swing, provided valuable insight into how it works, and verified that the Harris crypto 'reset' is a scam," he wrote.

Operation Choke Point 2.0 is the alleged coordinated plan by the Biden administration and federal regulators to cut off the digital assets sector from the banking industry.

Part of the Fed's announcement states that Customers Bank will now be required to notify the central bank thirty days ahead of "any new strategic initiative, product, service, or relationship with third parties related to the digital asset strategy."

For Winklevoss, the said requirement means "the Fed is now a direct gatekeeper standing between crypto companies and their ability to get a new bank account." He further noted that Customers Bank is only one of the few crypto-friendly banks in the U.S. at this point.

Several crypto users have since also aired their thoughts on the matter, with one saying "there was never a DNC pivot," and another pointed out that maybe the Democratic Party will only "bend the knees if they feel like they may be losing the election."

On the other hand, there were also others who accused Winklevoss of only pushing for Republican support. "We need pro crypto politicians on both sides – stop rooting for one party and push for bipartisan changes," one user wrote.

Another user said Winklevoss should stop "whining" about the Fed's actions and instead come up with "a better alternative" for the crypto space – one wherein users no longer need to "rely on the benevolence of regulators or the whims of politicians."

Crypto4Harris in full swing

Despite concerns about whether Harris and other Democrats are genuinely interested in ironing things out with the crypto industry, a group of advocates have launched the "Crypto4Harris" campaign. A virtual town hall is scheduled for next week, which will include some key crypto figures such as Mark Cuban and Anthony Scaramucci. Several Democratic leaders will also speak at the meeting, including Nickel.