The U.S. House of Representatives is investigating claims that bank executives and financial regulators have clandestinely blacklisted cryptocurrency firms, casting a shadow over the financial landscape. This probe unfolds against a backdrop of increasing testimonies from crypto industry leaders on Capitol Hill, highlighting their struggles with debanking during President Biden's administration. The Federal Deposit Insurance Corporation (FDIC) recently released extensive internal records, acquired via Freedom of Information Act (FOIA) requests, which have further fueled the controversy.
In 2023, notable financial institutions such as Silvergate Bank and Signature Bank were forced to close following the tumultuous collapse of Sam Bankman-Fried’s FTX. These closures have sparked debate about the FDIC's role, particularly after it arranged for the sale of Signature's assets while excluding $4 billion in crypto-related deposits. Adding to the complexity, the SEC has signaled a shift in regulations that previously restricted banks from holding bitcoin on their balance sheets.
Nathan McCauley, CEO of Anchorage Digital, testified before the House Financial Services Committee on February 6, alongside Fred Thiel, CEO of bitcoin miner MARA Holdings. McCauley detailed the repercussions of losing access to banking services, including a significant reduction in Anchorage's workforce by 20%, affecting 70 U.S. employees.
"We had a bank that we had a growing relationship with for a number of years, who basically on a dime, decided to turn off our bank account." – Nathan McCauley, CEO of Anchorage Digital
"Our story is pretty ridiculous." – Nathan McCauley, CEO of Anchorage Digital
The FDIC records indicate that banks faced pressure to avoid crypto clients even in the absence of explicit legal mandates. Former Democratic Congressman Barney Frank, who served on Signature Bank's board, claimed the FDIC's actions aimed "to send a very strong anti-crypto message." Meanwhile, Senator Rick Scott (R-Fla.) echoed President Trump's sentiments in his remarks at a Senate Banking Committee hearing on February 5.
"It is incredibly alarming and disheartening to hear stories about financial institutions cutting off services to digital asset firms, political figures, and conservative-aligned businesses and individuals." – Sen. Rick Scott (R-Fla.)
Paul Grewal, Coinbase's Chief Legal Officer, emphasized concerns about potential discrimination in banking services based on political views or industry affiliation.
"No one wants to see anyone denied basic banking services on the basis of their political views or whether they happen to work in an industry that might be out of favor with the current administration." – Paul Grewal, Coinbase Chief Legal Officer
Coinbase itself has been active in political circles, emerging as one of the top corporate donors in the 2024 election cycle. The company contributed over $75 million to Fairshake and its affiliate PACs.
Nic Carter, founder of Castle Island Ventures, pointed to communications between regulators and banks as critical evidence in understanding these debanking practices.
"Ultimately, the smoking gun is the communications between the regulators and the banks themselves." – Nic Carter, founder of Castle Island Ventures
Mike Lempres, former chairman of Silvergate and once a legal chief at Coinbase, criticized what he described as discriminatory banking policies threatening the digital asset ecosystem. In an opinion piece for the Wall Street Journal, Lempres highlighted the federal government's changing stance towards cryptocurrencies after years of vilification.
"The federal government is finally changing course after four years of vilifying cryptocurrencies and using legally dubious policies to force companies to bend to its will." – Mike Lempres, former chairman of Silvergate
David Marcus, CEO of infrastructure startup Lightspark, expressed optimism about the evolving regulatory environment for cryptocurrencies in America.
"it's a brand new day for crypto in America." – David Marcus, CEO of infrastructure startup Lightspark
"quite a polarity flip of atmosphere and energy for our entire industry." – David Marcus, CEO of infrastructure startup Lightspark
As investigations continue, the FDIC is under mounting pressure to revise guidelines that have made it challenging for banks to serve digital asset companies. This issue has garnered bipartisan attention in Congress due to its implications for both the crypto industry and broader political dynamics.
"There are concerns across the political aisle and across the Congress that banking services have in the past been weaponized in order to run roughshod over those who may be out of favor." – Paul Grewal, Coinbase Chief Legal Officer
Nic Carter noted that political motivations might have intertwined with efforts against debanking, broadening the issue's appeal.
"I think this was a political choice made by the folks in Congress and the administration that are going after debanking, was to tack on the conservative stuff as well." – Nic Carter, founder of Castle Island Ventures
"So it became an issue with a much broader appeal." – Nic Carter, founder of Castle Island Ventures
Meanwhile, former President Donald Trump and First Lady Melania Trump have ventured into cryptocurrencies themselves. Their launch of meme coins significantly increased their net worth and generated considerable trading fees.