The world of cryptocurrency has been a hot topic for quite some time now, with its volatile nature and unpredictability, it has always been surrounded by controversies. However, a recent turn of events has put the industry in an even more precarious position. The crypto company Protego Trust, which was founded with the sole aim of becoming a bank for cryptocurrencies, recently came under scrutiny by the federal government, raising questions about the future of cryptocurrency in the United States.
Protego Trust: The Crypto Bank That Tried to Play by the Rules
Protego Trust was founded by Greg Gilman, a lawyer turned venture capitalist, with the aim of creating a “pristine financial institution to serve the most discerning institutional clients.” The company spent $80 million pursuing a coveted approval for a national trust charter and won conditional approval in 2021. Protego Trust then raised over $100 million from big crypto companies, including Coinbase and FTX, among other investors. Its board included a former Fortune 500 CEO and even the onetime head of the Office of the Comptroller of the Currency, the country’s chief bank regulator.
Protego Trust planned to work exclusively with professional investing firms, providing safekeeping, trading, and lending services. The company wanted to be the squeaky-clean, bona fide bank that the crypto industry needed to win Wall Street’s business. But things did not go as planned.
The Federal Government’s Scrutiny of Protego Trust
The federal government’s scrutiny of Protego Trust began when the company filed for a charter from the Office of the Comptroller of the Currency (OCC). The OCC is the primary regulator for national banks and federal savings associations. Protego Trust’s application was initially approved on a conditional basis, but the OCC later rescinded the approval due to concerns about the company’s anti-money laundering and Bank Secrecy Act compliance programs.
Protego Trust’s CEO, Jonathan Silverman, was also indicted by a grand jury on charges of securities fraud and obstruction of justice. The indictment alleges that Silverman made false statements to the SEC about the company’s compliance programs and failed to disclose that the company was operating as an unregistered securities dealer.
The Future of Crypto in the United States
The scrutiny of Protego Trust has raised questions about the future of cryptocurrency in the United States. Some in the crypto industry see the government’s actions as an attempt to kill off the industry altogether. Others see it as a necessary step to weed out bad actors and bring more legitimacy to the industry.
In recent months, there have been several regulatory developments that have impacted the crypto industry. In December 2020, the Treasury Department proposed new rules that would require crypto exchanges to collect more information about their customers. In March 2021, the SEC filed a lawsuit against Ripple Labs, alleging that the company had conducted an unregistered securities offering by selling XRP tokens.
In April 2021, the SEC also delayed its decision on whether to approve a Bitcoin ETF proposed by VanEck. The decision was delayed until June, and some in the industry see it as a sign that the SEC is becoming more cautious about approving new crypto products.
Despite these regulatory challenges, the crypto industry continues to grow. Bitcoin and other cryptocurrencies have seen massive gains in recent months, with Bitcoin reaching an all-time high of over $64,000 in April 2021. Institutional investors are also getting in on the action, with companies like Tesla and Square investing in Bitcoin.
The Crypto Industry’s Response
The crypto industry has been vocal in its response to the federal government’s scrutiny of Protego Trust. Many in the industry see it as an attempt to stifle innovation and competition in the financial industry.
Some have also criticized the government’s approach to regulating the crypto industry, arguing that it is too heavy-handed and restrictive. They argue that the government should take a more hands-off approach and allow the industry to develop on its own.
Others, however, see the government’s actions as a necessary step to bring more legitimacy to the industry. They argue that bad actors need to be weeded out in order for the industry to gain the trust of mainstream investors.
The Debate Over Regulation
The debate over regulation in the crypto industry is not a new one. Since its inception, the industry has been characterized by a lack of regulation, which has led to concerns about fraud and other illegal activities.
Proponents of regulation argue that it is necessary to protect investors and ensure that the industry operates in a safe and transparent manner. They argue that regulation will bring more legitimacy to the industry and attract mainstream investors.
Opponents of regulation, on the other hand, argue that it is unnecessary and will stifle innovation and competition. They argue that the industry should be allowed to develop on its own, without interference from the government.
The Way Forward
The future of cryptocurrency in the United States is uncertain, but there are steps that can be taken to ensure that the industry continues to grow and develop.
First, the government needs to take a more measured approach to regulating the industry. While regulation is necessary to protect investors and ensure that the industry operates in a safe and transparent manner, it should not be overly restrictive or burdensome.
Second, the industry itself needs to do more to self-regulate. Bad actors need to be weeded out, and companies need to take steps to ensure that they are operating in a safe and transparent manner.
Finally, mainstream investors need to become more comfortable with investing in cryptocurrency. This will require education and outreach efforts by the industry and government, as well as more transparency and accountability from companies in the industry.
Conclusion
The federal government’s scrutiny of Protego Trust has raised questions about the future of cryptocurrency in the United States. While some in the industry see it as an attempt to kill off the industry, others see it as a necessary step to bring more legitimacy to the industry.
The debate over regulation in the industry is ongoing, but there are steps that can be taken to ensure that the industry continues to grow and develop. The government needs to take a more measured approach to regulation, the industry needs to self-regulate, and mainstream investors need to become more comfortable with investing in cryptocurrency.
The future of cryptocurrency in the United States is uncertain, but with the right approach, the industry has the potential to revolutionize the financial industry and bring more financial inclusion to people around the world.