It took less than a month, but with Donald Trump in the White House and Republicans in control of Congress, the era of “debanking” is coming to an end.
Last week, hearings by the Senate Banking Committee and House Financial Services Committee exposed debanking — or canceling bank accounts — as a key element of the Biden administration’s crackdown on both conservatives and on the $3.5 trillion crypto industry.
Trump and the GOP have vowed to reverse both efforts while making the country the crypto capital of the world. After the hearings, top crypto executives said they can already see a thaw in their relationships with banks, which are openly seeking business from the once shunned industry.
Here’s why: Fed chairman Jerome Powell (aka the top bank regulator) said on Tuesday during another Senate banking committee hearing that he is “struck” by evidence of debanking, and is removing language from examination manuals that causes Fed staff to cancel accounts.
“The worst of debanking appears to be behind us,” Nathan McCauley, the chief executive officer of crypto bank Anchorage Digital, told Fox Business’s Eleanor Terrett. “What’s even more significant than the possibility of debanking is the bipartisan recognition from lawmakers that using banking access as a pressure tactic threatens core American values of fair play and due process.”
Under pressure from the Biden regulatory apparatus, banks canceled accounts of clients who did business in crypto or those who supported conservative causes, like the Second Amendment, often on nebulous grounds, according to witness testimony. During last week’s hearing, Sen. Cynthia Lummis (R-Wyo.) presented documents that the Fed was directing examiners to make banks draw on so-called “controversial activity or comments” made by clients of those banks that wanted access to the Fed’s credit facilities.
The FDIC under new Trump-appointed acting chairman Travis Hill also released documents that showed that the agency warned banks to refrain from doing business with anything related to crypto.
Rather than risk being blocked or fined by regulators, the banks took no chances. The hearings indicated they canceled the accounts rather than fight the Biden administration’s regulatory might.
But the mood in Washington and in bank regulatory circles has clearly changed. Bank executives say they are courting crypto as regulators have backed off following the hearings; lefty causes like Diversity Equity and Inclusion are being canceled by Trump via executive order and ended by major corporations.
The banks also know they need solid reasons to cancel accounts that go beyond a client being “controversial.”
“The hearings were a clear sign that Congress gets it, and we no longer need to debate whether debanking is real because everybody, Democrats and Republicans, agree that it is,” Coinbase’s chief legal officer Paul Grewal told Terrett. “I think that message came through loud and clear and from our perspective, that’s a home run.”