Overview

“Debanking” has recently emerged as a controversial topic in Washington. This term describes the unsettling practice where crypto firms and other businesses have lost access to banking services, allegedly under pressure from federal regulators. Many in the crypto sector refer to this as “Operation Chokepoint 2.0,” drawing parallels with a prior initiative from the Obama administration that discouraged banks from servicing certain legal industries. Recent congressional investigations have sought to determine if regulators have improperly influenced banks to cut services to crypto companies and similar businesses.

Personal Testimony

I am presenting my experience before Congress today because my organization encountered this issue directly, despite being a federally regulated bank. It’s essential to grasp what has transpired to counter this threat to American values.

Instead of laying down transparent guidelines on who banks can serve, the practice of debanking proceeds through a vague and unaccountable method where regulators intimidate banks away from serving specific customers—not based on individual risk assessments, but rather based on blanket bias against whole industries. Banks, fearing enforcement actions or penalties, are left with no alternative but to comply, leaving law-abiding individuals and companies without basic banking services.

For example, in June 2023, we received a sudden notice from our bank that after more than two years of partnership, they were closing our account due to discomfort with our crypto clients’ transactions, despite no prior issues having been raised. This abrupt termination disrupted our operations and forced us to lay off 20% of our workforce.

Broader Implications

This crisis is not isolated. Legitimate businesses within the crypto industry face similar challenges, as many scramble to find basic banking services.

The actions of regulators have effectively acted as a ban on banking for the crypto sector, implemented without any formal policy backing or legislative approval, leaving many businesses uncertain about their future.

Proposed Solutions

To prevent these occurrences in the future, we must push for congressional oversight and implement solid safeguards. Legislation that guarantees fair access to essential banking services must be established, ensuring agencies are not pressuring banks to discriminate against legitimate businesses. By necessitating transparency in banking practices, we can uphold American innovation and maintain accountability in our financial systems. Until these reforms are adopted, the possibility of further restrictions looms.

Conclusion

Immediate action from the new Administration and Congress is crucial to rescind harmful regulatory guidance and ensure that such abuses of power do not happen again.