Caitlin Long, CEO of Avanti Bank and Trust, responded to an article recently published in the New York Times, which stated that cryptocurrencies and decentralized finance stand. “upsetting the banking sector“so fast that regulators can’t keep up.
Disrupting traditional finance is exactly the ultimate goal of cryptocurrencies and DeFi, but the piece titled “The Rapid Entry of Cryptocurrencies into the Banking Sector Causes Concern in Washington,” published on September 5th, has several inaccuracies and omissions according to Long.
The main argument of the article, which takes startup DeFi as an example BlockFi, is that crypto derivatives and highly leveraged products have become a regulator’s nightmare, who are now rushing to impose rules. High-risk speculation leaves investors vulnerable to heavy losses, the NYT says.
But Long said the problem is far more complex than it appears, arguing that “forze anti-crypto“They are constantly trying to put the industry in a bad light:
“The New York Times piece on cryptocurrencies and the banking sector deserves a thoughtful answer. The problem is not all black and white, the anti-crypto forces try to make a mess: the bad guys deserve to be called back, but the article ignores the fact that there are companies that are compliant with regulations. “
1/ @NYtimes story on #crypto/#banking deserves a thoughtful reply. Issue isn’t black & white: anti-crypto forces try to paint us all w/ a broad brush. Bad actors deserve to be called out, but the article ignores fact that regulatory-compliant firms exist. https://t.co/IUYTctBGfV
— Caitlin Long (@CaitlinLong_) September 5, 2021
Long also criticized the fact that the article does not explain that fully regulated crypto-banks already exist, such as his Wyoming-based company Avanti, launched in October 2020.
The woman stated that the Wyoming banking license does not allow “deposits in cryptocurrencies“Regulated banks may provide custody services for digital assets, but not accept deposits in anything other than fiat money:
“The article misses a fundamental point: There is a barrier protecting the Fed’s payment system from exposure to anything other than USD.”
Finally, the article claims that many crypto intermediaries have adopted some of the “bad behavior“of traditional finance, such as extreme financial leverage without requiring capital reserves. These are fair criticisms, admits Long, who had already in the past warned about leverage: very few intermediaries in the crypto sector, i.e. brokers and third parties operating between the bank and the blockchain, disclose information on their reserves.
Nonetheless, Long concludes, DeFi platforms offer a higher level of transparency compared to crypto intermediaries or traditional banks: this is one of the main positive qualities of decentralized finance.
This week, US Senator Elizabeth Warren he defined the entire cryptocurrency sector “the new ghost banks.“He expressed particular concern about stablecoins and their lack of transparency regarding reserves.
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