Caitlin Long, founder and CEO of Avanti Bank, has responded to a recent article by the New York Times that portraits crypto as the new “shadow bank.”
The article, titled “Crypto’s Rapid Move Into Banking Elicits Alarm in Washington,” claims that digital assets and decentralized finance (DeFi) are “disrupting the banking industry” and are progressing so swiftly that regulators struggle to catch up. The article consistently attacks the crypto industry, highlighting risks included in the space in the form of price volatility and scams.
However, Long asserts that the story “deserves a thoughtful reply,” adding that the issue is not straightforward. “Anti-crypto forces try to paint us all w[ith] a broad brush. Bad actors deserve to be called out, but the article ignores fact that regulatory-compliant firms exist,” she tweeted.
The article primarily concentrates on BlockFi, a DeFi lending, and trading platform. As per the New York Times’ article, BlockFi desires “to be the JPMorgan Chase of cryptocurrency.” The bank, which is dealing in crypto assets, offers loans, credit cards, and interest-generating accounts.
However, starting mid-July, numerous U.S. states demanded BlockFi to stop offering interest-generating accounts, accusing the firm of violating local securities laws. While banks also offer interest-generating accounts, official bodies claim that BlockFi’s acceptance of cryptocurrencies as deposits is an issue.
Nevertheless, Long detailed the article fails to acknowledge that even if BlockFi is unregulated — which is still not settled — there exist fully regulated crypto banks. She gave her own crypto bank, Avanti, as an example.
Launched in 2020, Avanti is a Wyoming-based crypto bank that has received a special-purpose banking charter from the state. Long said her special bank charter does not support crypto deposits.
She added that regulated banks are allowed to provide custody services for digital assets as long as their deposits are in fiat currency. “Article misses that critical point — it’s a firewall protecting Fed’s payment system from exposure to anything other than $ [USD],” Long said.
Long is not the only one miserable about how the article frames crypto. The article quotes Sen. Elizabeth Warren, a long-standing crypto critic, saying that “crypto is the new shadow bank.”
This has prompted dozens of crypto veterans to blame Warren for her lack of understanding of the space. “Gaslighting. BTC’s transactions are literally 100% transparent. The Federal Reserve is the real shadow bank,” one user said.