Bitcoin and other cryptocurrencies were created as a means of competing with established institutions. The crypto business is currently fighting for something else entirely: the ability to open a checking account, with the assistance of tech billionaires Marc Andreessen and Elon Musk.
Prominent and influential figures like Musk and Andreessen are attempting to argue that members of the cryptocurrency business are unfairly subjected to discrimination when they attempt to collaborate with large corporate institutions. It is alleged that banks have unjustly debanked cryptocurrency workers by closing their bank accounts in response to pressure from the Biden administration.
In the past month, the once-obscure term “debanking” has gained new attention after Andreessen, a Netscape co-founder and investor, claimed in an interview with podcast host Joe Rogan that he knows 30 tech company founders who were debanked in the last four years. This claim sparked a barrage of social media users sharing stories about how they, too, had lost access to their bank accounts.
Musk stated on X that debanking should be a federal crime if it is politically motivated and that it is an illustration of how corrupt the government has been.
Several federal regulatory bodies deny the accusation as false. According to the Office of the Comptroller of the Currency, which charters and oversees all national banks, banks are expected to evaluate each customer’s risk individually.
Banks are not required by the OCC to open, terminate, or manage individual accounts. According to a statement from the office, the OCC also does not advise or support banks in terminating certain types of consumer accounts in bulk.
The Treasury Department declined to comment when questioned by the White House over the claims made by Musk and Andreessen.
Both Musk and Andreessen have a history of making divisive political remarks, and there is no guarantee that anyone will be able to use financial services. However, it seems that their remarks regarding debanking have tapped into a well of dissatisfaction among right-wing activists, cryptocurrency enthusiasts, and even bank lobbyists regarding the way traditional banks are run in the United States.
Many cryptocurrency companies have to deal with a complex web of laws intended to prevent criminals, terrorist groups, or rogue regimes like North Korea from using their services to launder money. Some banks believe it is not worth the trouble because of the numerous compliance requirements in this sector, particularly if the client is a small startup.
According to JPMorgan Chase, the largest bank in the country by assets, authorities do require banks to promptly terminate accounts when there is a possibility of financial crime, failing which they risk fines of billions of dollars.
According to a statement from the bank, some organizations find it difficult to monitor for risk since the complexity of handling such compliance is simply too great. We appreciate the chance to collaborate with the incoming Administration and Congress to find solutions that eliminate regulatory uncertainty while preserving our nation’s capacity to combat financial crime.
Now, Musk and Andreessen are pushing for massive changes in the banking sector, using their newfound political influence with President-elect Donald Trump to help the cryptocurrency industry and others who they say have been unfairly cut off from traditional banks.
Andreessen s investment firm, Andreessen Horowitz, arguedin a blog post last monththat everyone has the right to a bank account even crypto companies, and in a follow-up last week it denouncedcompliance headachesin general.
Musk,in responseto an X post last month about debanking, called for deleting the Consumer Financial Protection Bureau, saying there are too many duplicative regulatory agencies even though the CFPB hasdenounced the practice of debankingand vowed to help fight it.
The CFPB, whose director, Rohit Chopra, was appointed by President Joe Biden, is currentlyfighting in a federal appeals courtfor the authority to investigate debanking allegations. In an effort to prevent payment wallet apps from unjustly debanking users, the CFPB finalized a rule last month. If Musk implements the requirement and adds a payments feature to the social network app, the CFPB may eventually regulate Musk’s X.
Last week, in a victory for the crypto industry, Trump said he would appoint the venture capitalist David Sacks, an industry ally, as his White House A.I. & Crypto Czar. Sacks has long opposed debanking; in 2022, he told The Free Press that his former employer, PayPal, was incorrect to bar extremists. Additionally, Trump has stated that he will choose veteran cryptocurrency supporter Paul Atkins to the position of Securities and Exchange Commission head.
Talking about debanking throughout the campaign helped Trump win over the cryptocurrency business.
They target your banks. They choke off your financial services, he told theBitcoin 2024 Conferencein Nashville, Tennessee, in July. A month later, he said he wanted to make the U.S. thecrypto capital of the planet.
The Trump family says they ve been debanked. Melania Trumpsaid in her memoir, Melania, that her long-time bank decided to terminate my account after she left the White House in 2021 and wouldn t let her son, Barron Trump, open an account. Donald Trump Jr. has saidhe lost accessto banking services.
A spokesperson for the Trump transition team did not respond to a request for comment on the president-elect s plans.
But the concern about debanking crosses party lines. Rep. Ritchie Torres, D-N.Y.,posted on X this monththat debanking is an insidious threat to civil liberties in America, mentioning Andreessen s comments but not any specific sector or incident.
The anecdotes about debanking may have a note of irony, given that cryptocurrency has been based on ananarchist ideologyandoutlaw imagesince its beginnings. Cryptocurrency developers have long said they want to replace traditional financial institutions, not rely on them.
It s not clear how widespread debanking actually is. The Blockchain Association, an industry trade group, last year started a tip line for people who believed they d been debanked, and now the group says it has identified a pattern of more than 30 concrete cases of denied applications or debanking due to banking customers involvement in the digital asset industry. It declined to release details of those cases, saying that it is still investigating the claims.
As we continue to wait for responses to our FOIA requests, we re exploring additional options to ensure the unlawful debanking of our industry ends, Marisa Coppel, the Blockchain Association s head of legal, said in a statement.
Last month, the associationsent a letterto Trump asking him to end the practice of debanking, possiblyvia an executive order.
In the interview with Rogan, Andreessen didn t provide examples or evidence of crypto-related debanking. Still, his comment prompted others to share personal stories about losing access to banking services with no explanation and despite having good credit. This situation could cripple a business or someone s personal life.
Sid Kalla, the co-founder of the crypto startup company Roll Labs in New York, was among those who spoke up. His company, also known as Turing Holdings, helps online creators mint digital tokens, which people can then trade online. After Andreessen s interview, heposted a photo on Xof a cancellation notice he said he received from Chase in May. The notice was about a business account, and Kalla said that it had been a seven-year banking relationship.
We tried to find out what happened, Kalla said in an interview. We tried to email and call our banker in the Brooklyn Heights branch, and no one had access to look behind the curtain. The employees were all very nice, but they honestly didn t seem to know the reason.
Kalla said the startup was without a checking account for three to four weeks, forcing a delay in paychecks for its 12 employees and contractors. Kalla s post on X has received 2.9 million views.
Chase, a unit of JPMorgan Chase, declined to comment on Roll Labs situation, citing a policy of not speaking about individual accounts.
At least one bank industry trade group says debanking is a real issue and one that s caused by government regulators pressure. Piggybacking off the comments by Andreessen, the Bank Policy Institute, whose chairman is JPMorgan Chase CEO Jamie Dimon, accused bank regulators of running a secret enforcement regime through government-appointed examiners who closely monitor bank operations.
It s a regime where an examiner s mandate that a bank designate a client as high risk generally forces the bank to close the account, the institutesaid in a post on X, linking to astatement from last monthcalling for major deregulation.
While much of the crypto industry remains legal, cryptocurrency has had a scandal-filled few years, with the founders of trading platformsBinanceandFTXgoing to prison, and the government has been slowly chipping away at areas it views as outside the law, such as digital tokens that some regulators argue areindistinguishable from traditional securities. The FBI says it receivedmore than 69,000 complaintslast year related to alleged cryptocurrency fraud, and the Treasury Department saysvarious cryptocurrency firmshave been used by Russian gangs and the North Korean government.
The stakes in the debanking debate are potentially high. Some crypto investors and lawmakers have proposed what would be, in effect, a federal right to banking services, and for some lobbying groups, the topic has become an opportunity to criticize other banking regulations, such as anti-money laundering compliance.
Several Republicans in Congress including Sen. Kevin Cramer, of North Dakota, have sponsored a bill,the Fair Access to Banking Act, which if passed would force banks, payment card networks and other financial services companies to do business with any person who is in compliance with the law.
Cramer told NBC News that he will reintroduce the bill next year and also seek changes via administrative rulemaking.
My first intention is to reintroduce it, build the coalition to support it, and begin working with the Trump administration as soon as possible on a rulemaking, he said in a statement. The coalition is growing as more industries and individuals get debanked.
The issue has been bubbling since last year, and it s not only the crypto industry that is complaining about getting cut off from banking services. Pawn shops, firearms manufacturers and mining companieshave joined a growing chorusof industries that say banks are discriminating against them, while Muslim charities and Jan. 6 rioters saythey ve also been targetedforpolitical reasons.
The allegations have echoes of an Obama-era program at the Justice Department namedOperation Choke Point. Designed to put pressure on payday lenders, the program involved bringing cases against banks that had allegedlylooked the other wayin processing unlawful payments. Some crypto investorscall the latest waveof debanking examples Operation Choke Point 2.0.
People in the crypto industry say the pressure on banks by regulators has been mostly informal, with no explicit directive to stop doing business with their industry, but there has been some guidance in writing. In January 2023, weeks afterfederal prosecutors chargedFTX founder Sam Bankman-Fried, three federal regulatory agencies the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency called on banks to limit their exposure to crypto activities and risks.
It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system, the agencies said in a joint statement. The debanking allegations appeared to begin shortly after, popping up in anarticle by a venture capitalistin Pirate Wires, a publication started by a venture capital marketing employee.
The FDIC and Federal Reserve declined to comment.
On Friday, the crypto exchange Coinbasereleased a slew of lettersit receivedafter suingthe FDIC last year, and in the lettersthe FDIC asks banksto pause or refrain from providing various services the banks had intended to launch.
Paul Grewal, chief legal officer for Coinbase, said he believes the FDIC may be acting unlawfully.
There s no statutory authority for the FDIC to say, We don t like a particular industry, he said in an interview. Today, it s crypto. Tomorrow, it might be alcohol.
The agency in a report this year denied it was targeting crypto startups or any other class of customer. Banks are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, the FDIC said in its2024 Risk Review.
The FDIC has also complained about the conduct of some crypto firms, some of which have falsely represented to their customers that their products are eligible for FDIC deposit insurance coverage, according toan agency advisoryin 2022.
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