Fintech and cryptocurrency firms competing with banks but subject to fewer regulations are “getting away with murder,” said Eugene Ludwig, a former Comptroller under the Bill Clinton administration.
(Bloomberg) — Fintech and cryptocurrency firms competing with banks but subject to fewer regulations are “getting away with murder,” said Eugene Ludwig, a former Comptroller under the Bill Clinton administration.
These new types of companies that take deposits and provide lending without proper oversight could be the reason for the next recession, Ludwig said during a Tuesday panel at the Clearing House and Bank Policy Institute’s annual conference in New York.
Furthermore, if the Federal Reserve gets into crypto by endorsing a central bank digital currency, that will take the deposit experience away from banking and into the government, which will present “all kinds of problems,” he added.
Banks should “retake the turf rather than let the turf devolve away” and be allowed to “play more aggressively in the crypto markets,” Ludwig said, though the tendency now is to do the opposite.
Ludwig, who served as comptroller of the Currency from 1993 to 1998, is now managing partner at Canapi Ventures, which invests in fintech companies. In 2018, he applauded a decision from the Office of the Comptroller of the Currency to let fintech companies apply for a bank-like charter.
But in the past year, the regulator has made it more difficult for crypto companies to secure this kind of license. It also heightened supervision requirements in November for banks looking to engage in crypto activities.
Ryan Nash, an analyst at Goldman Sachs Group who covers financial companies, said at the same panel that investors have been able to get comfortable with deposits in crypto, but are still uncertain about the lending side.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
