"It's pretty clear there has been a decision across the bank regulatory agencies in this [Biden] administration that crypto is inherently risky and needs to be extricated from the banking system," Brian Brooks, the former acting head of the Office of the Comptroller of the Currency (OCC), told CoinDesk TV’s “First Mover” on Wednesday.
Last week, Silvergate Bank, a California firm that catered to crypto companies, said it would “voluntarily liquidate” and shut down. Days later, tech startup-focused firm Silicon Valley Bank (SVB), which had some crypto clients, was closed by the California Department of Financial Protection and Innovation, which said the bank had “inadequate liquidity and insolvency.”
When he ran the OCC "I had a weekly call with the FDIC chairman and with the vice chairman of the [Federal Reserve]," said Brooks, now a member of the board of blockchain company Bitfury. "We talked every week for an hour and talked about what our priorities were for the coming week how we can support each other how our actions would affect the [banking] system."
Brooks reiterated comments made during the Milken Conference in Washington, D.C., earlier this month that the Biden administration is trying to close down crypto in what he calls Operation Choke Point 2.0, the "biggest story for the next six months." The original Operation Choke Point was the Obama-era initiative (when Joe Biden was vice president) investigating banks and the business they did with, among others, firms believed to be at a high risk for fraud and money laundering.
“My belief is that [regulators are] trying to send a signal that will eventually choke this [crypto] off,” Brooks told CDTV.
Brooks said he is "100% confident regulators were working together" in shutting down the banks, despite the differing circumstances.
The New York Department of Financial Services, for instance, said Tuesday Signature Bank was not closed because of crypto, but because of a "crisis of confidence" in the bank's leadership. Signature had been working to decrease it exposure to crypto in recent weeks. The California Department of Financial Protection and Innovation said it took over SVB because of its "inadequate liquidity and insolvency." Silvergate voluntarily closed a week after saying it would be late filing its annual report and was not sure about its ability to continue as a "going concern."
Still, to Brooks “these things are not accidents at all. I’m highly confident of that.”
But crypto won’t be so easily cut off, said Brooks. “There will always be smaller banks that are willing to step up” and work with crypto companies, he said. But it would “be better if larger banks with better risk management were serving the sector.”
CORRECTION (March 15, 2023 18:25 UTC): Brian Brooks is on the board of Bitfury. He is no longer the CEO.
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