- Amidst an enduring banking crisis, the Federal Reserve’s emergency bank loan facility surges to $100 billion.
- The ongoing pressure on the banking system might be a contributing factor to the intensified regulatory assault on cryptocurrencies.
The US central bank has been forced to provide further support to a beleaguered banking system, revealing the persistent banking crisis. This situation, in turn, might be contributing to the pronounced crackdown on cryptocurrencies.
The emergency bank loan facility of the Federal Reserve has reached a staggering $100 billion usage, pointing to the lingering turbulence in the US banking ecosystem. Joe Consorti, a notable market analyst, remarked that banks are clandestinely leveraging this fund to amplify the value of their devalued assets.
Launched in March 2023, the Bank Term Funding Program (BTFP) was designed to provide auxiliary funding to eligible depository institutions. The motive behind the program was to ensure that banks can satisfy all depositor needs, effectively acting as a banking bailout.
Consorti has noted that distressed banks are using the BTFP to covertly uplift their assets’ value, describing it as a temporary “band-aid” while cautioning that the hidden risk is proliferating. Echoing his insights, Nick Timiraos, the Wall Street Journal’s chief economics correspondent, observed an ongoing rise in Fed lending to banks via the BTFP.
Meanwhile, ‘Frog Capital,’ a financial analyst, pointed out the exceeding of the initially stated $25 billion limit for the Emergency Bank Term Funding Program, which has now crossed $100 billion.
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The continuing struggle to stabilize the banking system is indicative of the looming fear of another financial crisis reminiscent of 2008. This environment, combined with the significant influence that big banks and Wall Street hold over federal regulators, could be illuminating the reasons for the intensified scrutiny and regulatory actions against cryptocurrencies.
Born out of the 2008 financial crisis, Bitcoin emerged as an alternative to a system rattled by toxic loans and fractional reserves. Consequently, cryptocurrencies are seen as a formidable challenge to traditional banking. This threat perception is reinforced by recent developments, such as Binance.US losing its banking partners and consequently suspending USD deposits.
As long as cryptocurrencies continue to pose a substantial threat to the traditional banking system’s profitability, it’s likely that banks, alongside their government allies, will continue their attempts to suppress the crypto market.
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