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The Federal Deposit Insurance Corporation issued a consent order to crypto-friendly Cross River Bank regarding “unsafe or unsound banking practices.”

Cross River Bank is a venture-backed New Jersey regional bank that does business with major crypto firms like Coinbase and Circle.

“The FDIC considered the matter and determined, and the bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations by failing to establish and maintain internal controls, information systems, and prudent credit underwriting practices,” the 34-page consent order said.

The FDIC supplies insurance for depositors in American commercial banks and savings banks. A spokesperson did not comment but directed The Block to the consent order which was issued on March 8 and made public Friday. 

A Cross River Bank spokesperson said the order is “the result of a standard review” pertaining to aspects of the bank’s lending processes two years ago. 

“We had identified areas for improvement prior to the examination and the examination identified others. Since that time, we proactively made significant enhancements to our fair lending and other programs including investing in technology and personnel. At this time many of the enhancements have been completed or will be completed in the coming months,” the spokesperson said in a statement to The Block.

The bank is “dedicated to partnering with the fintech community” and called itself “a model for transparent, compliant, fair and responsible lending.”

“Importantly, the order does not identify discriminatory practices or anything that would require Cross River to compensate consumers for harm. Further, it places no limitations on our extensive existing Fintech Partnerships or the credit products we presently offer in partnership with them. We don’t expect that the order will have any meaningful impact our growth trajectory,” the spokesperson said. 

Regulatory scrutiny

The order calls on the bank’s board to increase its supervision and direction of management and take “corrective action” to remedy any unsafe practices and prevent future violations. The bank is also asked to review its information systems, identify new credit products and submit a list of third parties offering them, among other tasks. 

Cross River Bank is required to compile written progress reports on actions taken to “secure compliance” with the order. 

Gilles Gade, the founder, chair and CEO of Cross River Bank, acknowledged this week that his institution is facing regulatory scrutiny after the collapse of Silicon Valley Bank. He made the comments in a “Q1 Message” blog post which did not mention the FDIC consent order.

“Regulatory scrutiny on banks in general is increasing and the events with SVB will only expand those efforts with a specific focus on banks that support fintech. Cross River is the largest of these banking institutions and as such, we have regulatory examiners reviewing some elements of our business on a continuous basis,” Gade wrote in the blog post published on Thursday.

“We view our compliance capability as a strategic advantage and are proud to lead our industry in maintaining the highest levels of compliance, transparency, and responsibility,” he continued. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Brian Quintenz, the head of policy at a16z crypto and a former CFTC commissioner, said Friday that new legislation was needed in Congress amid ongoing regulatory uncertainty in the U.S. and what’s been perceived by some as a widespread crackdown on the crypto sector by the Securities and Exchange Commission. 

“We’ve seen the chair of the SEC take the view that all crypto except for Bitcoin, are in his jurisdiction and need to follow their rules,” Quintenz said, speaking on a panel at CoinDesk’s Consensus conference in Austin, Texas about whether or not a turf war was ongoing between the SEC, which regulates securities, and the Commodity Futures Trading Commission, which regulates commodities futures. Quintenz served at the CFTC between 2017 and 2021.

“A war involves two sides, and right now, I think there’s one side that’s on the field that’s running down to the other end and spiking the football, because the CFTC does not have a seat at that table,” he said.

SEC Chair Gary Gensler earlier this week doubled down on his message that crypto markets suffer from a lack regulatory compliance, not regulatory clarity, in a video he posted on Twitter that referenced pet goldfish and dogs. 

Gary’s goldfish

Quintenz didn’t appear to be too impressed with the argument. 

“In order for the CFTC, or any other regulator, to have a legitimate view of their jurisdiction, that could challenge the SEC’s perspective on what is and is not a security, and maybe for some more clarity, other than the videos that we are seeing posted on the SEC Chairman’s Twitter feed which talk about goldfish and dogs, you need to have a new law that’s passed by Congress that addresses what these products actually are and has a regulatory regime that is fit for purpose that doesn’t kill their technology like the securities laws do,” he said. 

Quintenz said the Howey Test, which the SEC uses to determine whether or not an investment is a security and under its jurisdiction, should be applied on a “fact and circumstances” basis, and not broadly on an entire industry. He also alleged that the SEC had been going after “very weak defendants” that don’t always have the resources to defend themselves. 

“You’re going to have settlements that agree with that perspective from the agency that isn’t necessarily addressing the facts and circumstances of those underlying products,” he said. 

Coinbase, the largest U.S. crypto exchange, announced earlier this week that it is suing the SEC for clear rules specific to digital assets. 

a16z sees need for new crypto legislation 

Quintenz said that a legislative solution is needed and that he has seen some progress on the House Financial Services Committee and House Agriculture Committee.

“Without a willing regulator to accommodate the technology and write rules that fit the technology and protect consumers in the appropriate way, Congress has to step in,” he said. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

In his first public appearance as CEO of Yuga Labs, Daniel Alegre may have said web3 isn’t a game of kill or be killed, but he did more or less imply he wants his company to sit head and shoulders above its rivals.

“What I want Yuga to be is the front door to web3,” Alegre said on Friday at CoinDesk’s Consensus conference in Austin, Tx. “The transformation is gonna happen. It’s happening obviously in art, it’s happening in digital consumption and obviously gaming but it’s going to expand into so many different areas of industry. Otherside is that entry way into web3.”

Web3 is envisioned as the next phase of the internet that is blockchain-powered and decentralized. Otherside, a virtual world where users will be able to come together online to socialize and play games, is Yuga’s “big bet” in web3 Alegre said.

Alegre, although named Yuga’s new CEO back in December, only took over a few weeks ago. He was formerly an executive at Google and then Activision Blizzard.

Otherside is by most estimations already one of web3’s biggest success stories. Otherdeeds, the non-fungible tokens that serve as certificates of ownership for plots of land on Otherside, have generated more than $1.1 billion in trading, according to The Block Research.

Virtual plots of land on The Sandbox, which from day one billed itself as a web3, metaverse platform that would serve a similar purpose to Otherside, has yielded about $300 million in trading volume, also according to The Block Research.

Yuga Labs’s Otherside as ‘front door’

After declaring he wanted Yuga’s Otherside platform to be web3’s “front door,” Alegre then said that doesn’t mean he’s angling to be the “biggest in the space.” Instead, the CEO said he’s willing to “embrace third parties who can actually follow with the vision that we have and bring them onto [Otherside].”

Yuga has been valued at $4 billion after being founded in 2021.

“This is not a winner take all environment,” he added, before returning to early comments about wanting to make it easier for people to be part of the Yuga Labs community. “My mission is to make web3 as easily available and bring great content creators and the economy together.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Mastercard is teaming with public blockchain developers Aptos Labs, Ava Labs, Polygon and The Solana Foundation on a new set of standards it’s dubbing Crypto Credential in an effort to build the trust of consumers, businesses and governments in the sector. 

“Instilling trust in the blockchain ecosystem is a critical step towards realizing its full potential,” Mastercard head of crypto and blockchain Raj Dhamodharan said in a statement. “We need a way for trusted, compliant, and verifiable interactions to take place on public blockchain networks.”

Mastercard Crypto Credential “will establish a set of common standards and infrastructure that will help attest trusted interactions among consumers and businesses using blockchain networks,” the company said, noting that NFT projects require different verification requirements than those needed to send or receive cryptocurrency.

The payment processor said the new set of standards will “ensure that those interested in interacting across web3 environments are meeting defined standards for the types of activities they’d like to pursue.”

The news comes after a string of bankruptcies in crypto, from 3AC and Celsius to Voyager and FTX, have eroded trust in the industry. The value of cryptocurrencies has also tumbled from 2021 highs, and trading volumes have subsided.

Mastercard crypto standards

While the public blockchain networks including Aptos Labs and Polygon will help bring the standards to application developers in their ecosystems, Mastercard said that wallet providers Bit2Me, Lirium, Mercado Bitcoin and Uphold will also use the tools on an initial project to enable cross border transfers between the U.S. and Latin America and the Caribbean. 

“Together, we’ll collaborate to enhance verification in NFTs, ticketing, enterprise and other payments solutions,” Dhamodharan said. 

The move shows the continued interest that large, global payment processors have in crypto, despite reports of slowed down plans amid a widespread market decline over the past year. Mastercard, for instance, has worked with Binance to issue crypto-linked debit cards in Brazil and Argentina. 

Visa, meanwhile, is hiring software engineers as it develops for what it said is its “ambitious crypto product roadmap.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.