In a recent post that has sparked significant debate, David Schwartz, Ripple’s Chief Technology Officer and a key figure behind the XRP Ledger and XRP token, has taken a strong stance against the Federal Reserve’s recent actions. Schwartz’s critique centers around the Fed’s decision to impose a “cease and desist” order on United Texas Bank, a member of the Federal Reserve System, due to its involvement with cryptocurrency users.
Fed’s Controversial Sanctions
The Federal Reserve’s order against United Texas Bank was prompted by an examination that uncovered “significant deficiencies” related to the bank’s handling of foreign correspondent banking and virtual currency customers. Specifically, the Fed cited concerns about the bank’s risk management practices and its compliance with anti-money laundering (AML) regulations, including the Bank Secrecy Act.
Dennis Porter, President and Co-founder of Satoshi Action Fund, shared a screenshot of the Fed’s ruling on social media, which prompted Schwartz’s response. According to Porter’s post, the Fed’s document highlighted several issues but also revealed a broader strategy that Schwartz argues is problematic.
Schwartz’s Critique – Indirect Regulation
Schwartz’s critique focuses on what he views as an indirect method of regulation by the Federal Reserve. He argues that instead of directly regulating cryptocurrency firms, the Fed is targeting their business partners, thereby avoiding the due process typically required in legal proceedings. Schwartz labeled this approach as an “end-run around due process,” and he has called for courts to intervene to stop such practices.
The Ripple CTO contends that if the U.S. government wishes to penalize cryptocurrency companies, it should address them directly rather than punishing their partners. This method, Schwartz argues, deprives crypto firms of future business opportunities without granting them the due rights and processes normally afforded in legal disputes.
Ripple’s Ongoing Legal Battle
This controversy comes at a time when Ripple is already entangled in a high-profile legal battle with the Securities and Exchange Commission (SEC). Despite notable victories in court over the past year and recent successes in August 2024, the SEC’s aggressive stance under Chairman Gary Gensler continues to be a point of contention. Many in Congress view the SEC’s actions as an overreach of its regulatory powers, and the possibility of an appeal from the SEC in the Ripple case remains a looming threat.
Also Read: Ripple vs. SEC – Appeal Odds Surge As $138.75M Stays In Legal Limbo
Schwartz’s comments underscore a growing frustration within the cryptocurrency community regarding regulatory practices. As Ripple and other crypto firms navigate these turbulent waters, the debate over regulatory strategies and their impact on the industry is likely to intensify.
In conclusion, David Schwartz’s outspoken criticism of the Federal Reserve’s actions against United Texas Bank highlights a broader discussion about the regulatory approach to cryptocurrencies. As the legal and regulatory landscape continues to evolve, the cryptocurrency industry will be closely watching how these issues are addressed and resolved.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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