Former United States Comptroller during President Bill Clinton’s administration and managing partner at Canapi Ventures Eugene Ludwig has suggested that the fintech and cryptocurrency sector poses a threat to the banks, citing minimal regulatory oversight.
Ludwig noted that banks and crypto sector firms that are competing, have unequal regulatory playing field stating that the latter is “getting away with murder,” Bloomberg reported on September 6.
The former official who was speaking during the Clearing House and Bank Policy Institute’s annual conference called on banks to “retake the turf rather than let the turf devolve away.”
According to Ludwig, crypto-related firms that take deposits and offer lending services without established oversight might be the catalyst for the next recessions. His sentiments come in the wake of the crypto lending platform Celsius collapse after the company cited issues with liquidity emanating from the ongoing digital asset market meltdown.
Effects of a digital dollar
Ludwig also delved into the proposition of launching a digital dollar, noting that such an initiative by the Federal Reserve will take the deposit experience away from banking and into the government. In such a case, Ludwig believes that the situation will present “all kinds of problems.”
“There is a huge danger that if the Fed gets into crypto and begins to take deposit experience away from the banking industry and into the govt., we will have all kinds of problems. The banking system should be used as the safe crypto distributor,” he said.
Ludwig, whose firm invests in fintech, has been pushing for such companies to apply for a bank-like charter. However, U.S. regulators have tightened the requirements to issue such permits to crypto-related companies alongside increasing supervision needs for banks intending to offer digital asset services.
There are projections that the regulatory aspect might change drastically following the ongoing crypto winter, resulting in significant losses. Notably, the U.S. is currently considering several regulatory proposals.