Omid Malekan, an author and adjunct professor at Columbia Business School, has expressed concerns about the impact of U.S. regulatory agencies on both the cryptocurrency industry and the traditional financial sector. In a statement posted on X, Malekan singled out U.S. Sen. Elizabeth Warren (D-Mass.) for her role in the difficulties faced by U.S. banks with ties to the crypto industry.
"The fact that America's premiere regulatory agencies, all of which do important work, have torpedoed their own credibility to serve their political benefactors in Washington (or protect their once and future employers on Wall Street) is a grave danger to the crypto industry", said Omid Malekan, according to X. "Treasury Secretary Yellen has it backwards. It's not crypto that is a threat to our financial system. It is the government's illegal, immoral, and illogical crackdown on it that is."
In his post, Malekan argued that American bank regulators have obstructed major banks like J.P. Morgan and Bank of America from accepting crypto companies as clients. As a result, he said these companies were compelled to collaborate with a limited number of regional banks. "Bank regulators (of all people) know the dangers of concentration in deposits, but doubled down on anti-crypto censorship," said Malekan.
Malekan also claimed that U.S. regulators have refrained from providing clear guidance for crypto companies, thereby "forcing everything either offshore or into a gray zone." He attributed this lack of regulatory clarity to many American crypto users turning to offshore platforms such as FTX and Tether, which put domestic companies like Coinbase at a disadvantage. When FTX collapsed, U.S. officials - who had previously "embraced its criminal founder," Sam Bankman-Fried - shifted their focus towards domestic crypto exchanges. According to Malekan, this was "a highly cynical ploy designed to deflect from their [U.S. officials'] own culpability."
In January 2023, banking regulators issued a public warning about the risks associated with banking crypto firms - an action that Malekan described as "unprecedented." He explained: "Fractional-reserve banking is fragile by design and runs are contagious... That’s why government officials always say the banking system is safe, even when it’s not." The same month saw the Federal Reserve reject Custodia Bank's request for a master account that could have served as a reliable payment intermediary and stablecoin issuer for the digital asset industry. Subsequently, regulators shut down the regulated, Paxos-issued stablecoin BUSD, prompting American crypto users to once again turn to offshore options.
In his post, Malekan also claimed that Sen. Warren, who has been linked to Bankman-Fried's parents, initiated an attack on Silvergate - a significant bank for the crypto industry. Following this, Silvergate and Silicon Valley Bank (SVB), another major bank serving the industry, both ceased operations. "Unlike every other American bank in the past 20 years, nobody tried to bail it out," Malekan said of Silvergate. The closure of SVB led to the de-pegging of the Circle-issued stablecoin USDC. "Had regulators and Wall Street CEOs let Circle bank at 'too big to fail banks' like it had wanted to all along this wouldn’t have happened," he said. Despite increasing adoption of cryptocurrencies, Malekan pointed out that Congress has yet to legislate regulations for the industry while the U.S. Securities and Exchange Commission (SEC) continues its scrutiny of domestic crypto firms, sometimes losing "high profile lawsuits."
Malekan is known for his books such as "Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms," as stated on Columbia Business School's website. He teaches courses on blockchain and cryptocurrency at Columbia and his insights have been featured in renowned publications including the Wall Street Journal and Financial Times.
