According to Wilmarth, most crypto firms use deceptive marketing tactics to attract inexperienced retail investors, leading to significant losses and potential banking crises. He believes that liberal US politicians should acknowledge their mistake and prohibit banks from participating in cryptography-related activities.
Wilmarth suggests that the U.S. Securities and Exchange Commission (SEC) should be designated as the primary federal regulator of the cryptocurrency market. He believes that the SEC should have greater powers and regulatory oversight compared to the Commodity Futures Trading Commission (CFTC) to protect investors.
In addition, Wilmarth proposes a federal legislation that would prohibit FDIC-insured banks from investing in cryptocurrencies or providing financial services to crypto firms unless they are registered and regulated by government agencies.
Wilmarth also highlights the risks posed by stablecoins issued by non-bank depository institutions. He believes that these stablecoins could become a form of “shadow deposits” that undermine the integrity of the US banking system. He suggests that stablecoin issuers should be required to register for banking activities and obtain FDIC insurance to ensure compliance with regulatory protections for depositors.
Notably, the collapse of Signature Bank and Silicon Valley Bank, both crypto-friendly banks, was attributed to poor management and miscalculations in crypto investing, according to FDIC Chairman Martin Gruenberg.