U.S. banking regulators are implementing new limits on financial institutions that cater to the cryptocurrency sector. This decision follows recent bankruptcies, prompting officials to scrutinize digital currencies.

How Restrictions Affect Crypto Companies

The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) have mandated that banks cap deposits from cryptocurrency firms at 15% of their overall deposits to mitigate risk. Regulators are particularly wary of real-time payment systems preferred by crypto businesses, which operate continuously beyond standard banking hours.

Are Legal Grounds for Restrictions Solid?

Legal experts from the Cooper & Kirk law firm argue that the ongoing restrictions lack a solid legal basis, stating, 'Limiting crypto deposits may violate the principle of due process in the Constitution.' While some attorneys believe regulators are overstepping, others assert that banks are merely following risk management protocols.

Consequences for Banking and Crypto Sectors

Regulators aim to prevent banks from reliance on specific sectors. The crypto industry has dubbed this initiative 'Operation Choke Point 2.0.' Regulatory pressure complicates financial access for cryptocurrency firms. While regulators focus on ensuring banks maintain diverse deposit portfolios, these new restrictions are limiting their capacity to support cryptocurrency enterprises effectively.

The introduction of new restrictions highlights regulators' attempts to mitigate risks associated with the cryptocurrency sector. However, it also raises questions about the legal legitimacy of such measures and their impact on crypto firms' access to financial services.