BPInsights: May 16, 2026

Senate Panel Advances Crypto Market Structure Bill

The Senate Banking Committee on Thursday advanced the highly anticipated crypto market structure bill on a vote of 15-9. All Republicans on the committee voted in favor and were joined by Democrats Sen. Ruben Gallego (D-Ariz.) and Sen. Angela Alsobrooks (D-Md.). Gallego and Alsobrooks both commented that their votes yesterday were not guarantees that they would support the bill when it came to the floor, noting their outstanding concerns with the legislation. BPI and other banking industry groups expressed strong concerns about language in the bill that aims to prohibit the payment of yield but would allow interest-like payment structures that could draw deposits from the banking system.

• Key Issues. A group of banking trade associations issued a statement regarding the vote by the Senate Banking Committee and the next steps for the legislation.
• What's Next. The bill will now be joined with another measure advanced by the Senate Agriculture Committee, before a Senate floor vote, but it's unclear what the timing would be; the White House has urged lawmakers to pass the bill by July 4.

Five Key Things

1. Warsh Confirmed by Senate

With two votes last week, the Senate confirmed Federal Reserve chair nominee Kevin Warsh to a 14 year term as a Fed governor and to his position as Fed Chair. The votes were 51-45 and 54-45, respectively, with Sen. John Fetterman (D-PA) being the lone Democrat voting in favor in both votes. Fed Chair Jerome Powell's term expired Friday.

2. Kansas City Fed Releases Information on Kraken Account

The Federal Reserve Bank of Kansas City recently released new information on Kraken's master account, granted to the crypto firm in March. Kraken is authorized to access the Fedwire payment system, but may not access intraday credit or the discount window. Its account is subject to a closing balance limit and will not receive interest. The decision to grant Kraken a master account did not expand eligibility for access or establish a new category for applicants, according to the Kansas City Fed, and the terms on which the account was granted are consistent with the potential payment account terms under the Fed's request for information on "skinny" accounts. "As a result, Kraken Financial's account could be viewed as a pilot of the payment account concept, providing the Federal Reserve with insights in a limited and risk-controlled manner," the Kansas City Fed stated.

• OCC Trust Charter Bid. Kraken has also applied for an OCC national trust charter, according to recent media reports. BPI has expressed concern about Kraken's master account access as well as the recent trend of crypto firms obtaining national trust charters, which pose risks to the banking system's stability.

3. Bowman Previews CAMELS Rating Reform

Federal Reserve Vice Chair for Supervision Michelle Bowman previewed forthcoming changes to the CAMELS rating system used to assess the safety and soundness of banks late last week, saying changes would be proposed "in the coming weeks." "What we found was that oftentimes the 'M' part, the management rating, had been abused in ways that was not transparent," she said at a Hoover Institution event. "It integrated a lot of things that weren't related to necessarily management that then led to an opportunity to downgrade the financial institution from its composite perspective."

Bowman has spearheaded a shift in supervision to focus on the most material risks. This shift included finalized changes to the Large Financial Institutions rating system, which applies to large bank holding companies, in November 2025. Those changes aimed to reflect banks' financial strength more accurately in their ratings.

• Nonbank Financial Institutions. In prepared remarks at the same event, Bowman highlighted initiatives to address the migration of financial intermediation out of the banking system as a result of excessive regulation. These actions include recently proposed changes to the Basel framework to "address the punitive capital treatment imposed on traditional bank lending activity" such as mortgage lending; recognizing that "addressing the inappropriate risk weighting of certain activities doesn't mean eliminating private credit from the market"; and enhancing transparency on bank lending to nonbanks through improvements in regulatory reporting.

4. Brooke Nominated as Deputy Treasury Secretary

President Trump on Monday nominated Acting Deputy Treasury Secretary Francis Brooke to fill the no. 2 position permanently. The Senate will need to confirm Brooke for the role. Brooke was confirmed by the Senate last year to serve as Treasury's top international trade official.

5. The Crypto Ledger

Here's what's new in crypto.

• FinCEN Warns Banks on Iran Sanctions Evasion. FinCEN issued a recent alert to banks warning of potential sanctions evasion, including through the use of crypto. The Treasury bureau warned that the Iranian regime uses shell companies, crypto infrastructure and other service providers to evade U.S. sanctions and urged banks to be vigilant. Iranian digital assets activity, a cornerstone of its sanctions evasion approach, has reached billions of dollars per year, FinCEN said.
• Binance Seeks Dismissal of Hamas Victims' Claims in Lawsuit. Binance and former CEO Changpeng Zhao asked a federal court to dismiss the last remaining claim in a lawsuit accusing the crypto exchange of aiding and abetting the terrorist group Hamas' attack on Israel. The suit does not demonstrate that Binance and Zhao "knowingly and substantially" assisted attacks carried out on Oct. 7, 2023, according to court filings.
• Bitcoin Depot Facilitated Crypto ATM Fraud, Suit Claims. A proposed class action lawsuit in Idaho federal court accused Bitcoin Depot of systemically facilitating fraud involving its bitcoin ATM network. An Oregon couple leading the lawsuit said crypto ATM scams target consumers who are "manipulated into states of panic and urgency by fraudsters claiming identity theft or other emergencies."
• Polling Shows Crypto Isn't an Important Issue for Voters. The POLITICO Poll found that voters are broadly skeptical of the crypto industry and don't view it as an important issue for political candidates, with just 18 percent of respondents saying lawmakers should prioritize establishing rules for the cryptocurrency market. In an interview, Senator Tillis added, "They don't care… For people who grew up like me, I hope to God they're not talking about crypto right now. Get a savings and loan account and try and get some minimum guaranteed return, period." These findings align with the Fed's most recent annual Survey of Household Economics and Decisionmaking, which found that only 10% of Americans held cryptocurrency for investment or payment purposes in 2025.
• Crypto Enthusiasm for Zcash Grows, While Enhanced Anonymity Features Raise Concern Among Authorities. Some of crypto's most vocal cheerleaders, including Tyler and Cameron Winklevoss, are increasingly interested in Zcash digital tokens, praising its enhanced privacy features. Zcash gives users the ability to use shielded addresses that use encryption to hide sensitive data, such as the sender, receiver and transaction amount. While Zcash proponents argue that it counters threats like financial surveillance by authoritarian governments, authorities have expressed concern that privacy coins such as Zcash will enable malicious actors to evade sanctions and commit crimes.

In Case You Missed It

Newsom to Appoint Rohit Chopra to Lead California Consumer Agency

California Governor Gavin Newsom appointed former CFPB Director Rohit Chopra to be the first Secretary of California's Business and Consumer Services Agency, which was created by the Governor last year. The BCSA will become operational on July 1, 2026 and was spun out of the Business, Consumer Services and Housing Agency. BCSA will contain departments that were previously under the BCSH, including the Department of Financial Protection and Innovation.

OCC Issues Final Rules on Preemption of State Interest-on-Escrow Laws

On Friday, the OCC issued two rules regarding the Agency's preemption of state interest-on-escrow laws and other state laws related to escrow accounts. First, the OCC issued a final rule to expressly codify banks' power to establish and maintain escrow accounts and to clarify that the terms and conditions of escrow accounts, including the extent of any compensation paid to customers, are business decisions to be made by each bank. Second, the OCC issued a final preemption determination that concludes that the National Bank Act preempts New York State's law mandating payment of interest on escrow accounts. The determination further concludes that the substantively equivalent laws of thirteen other states are preempted.

Traversing the Pond

Here's the latest in international banking policy.

• Lagarde Skeptical on EU Stablecoins. ECB President Christine Lagarde expressed skepticism of the notion that Europe must promote euro-denominated stablecoins in order to remain relevant amid growing stablecoin activity in the U.S. and other jurisdictions. "[W]hat this debate has not asked clearly enough is what, precisely, stablecoins are for," Lagarde said in a recent speech at an economic forum hosted by the Spanish central bank. "The benefits attributed to them rest on two distinct functions - a monetary function and a technological function - that are systematically conflated in the current debate. To navigate clearly, we need to separate them."
• Supervision Health Check. Sam Woods, head of the Bank of England's Prudential Regulation Authority, discussed the purpose and history of bank supervision in a recent speech, in which he likened bank supervisors to public health officials, making "diagnoses" based on detailed consultations while also containing contagion that could endanger the public. He looked ahead to the future of supervision, suggesting that it could benefit from being viewed formally as a profession, like doctors and lawyers. He described the breadth and depth of expertise necessary for the role: "It is necessary but not sufficient to be technically proficient at navigating various arcane topics of financial regulation like capital, liquidity and group consolidation. Supervisors also require a deep and holistic understanding of financial institutions, the risks that affect them and the psychology of organisations and individuals. To deliver on their mandates, supervisors need to be able to develop and maintain these skills, supported by a wider system which recognises the value of independent, expert, supervisors." He also noted that bank supervisors of the future will need to be proficient in emerging technologies like AI and quantum computing. "This might in time mean a more senior and more specialised workforce," Woods said.
• AI Disruption. Woods also warned recently about the risk of significant disruption from the latest AI models, such as Anthropic's Mythos and ChatGPT 5.5 Instant. Banks should ramp up cyber hygiene practices and address vulnerabilities quickly, he said. The European Central Bank spoke with similar urgency, with Frank Elderson, ECB vice chair of supervision, urging banks to begin taking action, even prior to gaining access to Mythos. This follows comments by ECB president, Christine Lagarde, earlier this month that the ECB is studying defenses ⁠against Mythos-guided cyberattacks.
• ECB Declines Public Records Request for Digital Euro Costs. The European Central Bank is facing criticism after declining a request for detailed information on digital euro development costs. According to the requester, the ECB refused to provide a cost breakdown citing concerns over commercial interests, internal finances, and confidentiality. While the ECB has shared some high level estimates, there is no comprehensive public figure for total project costs. The lack of detailed disclosure has led to concerns about transparency.

Member News

JPMorgan Chase Announces $14M in Philanthropic Investments to Safeguard Consumers from Fraud, Scams

JPMorgan Chase this week unveiled $14 million in strategic philanthropic investments to help protect consumers from fraud and scams. The effort includes support for the Aspen Institute Financial Security Program, BBB Institute for Marketplace Trust and Stop Scams Alliance. Read more here.

Capital One Files Lawsuit Aimed at Disrupting Scam Networks

This week, Capital One filed a federal lawsuit in the Eastern District of Virginia targeting the anonymous networks behind robocall and spoofing scams that impersonate the bank's brand via fake texts, calls, emails and websites. The trademark infringement suit, filed on the heels of a new FCC push to combat illegal robocalls, aims to cut through the jurisdictional complexity these transnational crime groups exploit. Read more here.

Upcoming Events

• 5/18/2026: European University Institute & Bank Policy Institute 2026 Research Conference on Banking Regulation
• 5/20/2026: Semafor Banking on the Future Forum
• 5/20/2026: House Financial Services Subcommittee on Digital Assets, Financial Technology and Artificial Intelligence Hearing: How Bank-Fintech Collaborations Enhance Financial Infrastructure
• 5/21/2026: House Financial Services Subcommittee on National Security, Illicit Finance and International Financial Institutions Hearing on Modernizing the BSA for the 21st Century