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.
Using their newly acquired political clout with President-elect Donald Trump, Musk and Andreessen are now advocating for significant reforms in the banking industry to support the cryptocurrency sector and others they claim have been unjustly excluded from traditional banks.
In a follow-up this week, Andreessen Horowitz, Andreessen’s investment firm, condemned compliance headaches in general after arguing in a blog post last month that everyone, including cryptocurrency startups, had the right to a bank account.
In response to an X post about debanking last month, Musk advocated for the Consumer Financial Protection Bureau to be abolished, arguing that there are too many redundant regulatory bodies, despite the fact that the CFPB has denounced the practice and pledged to assist in combating it.
The CFPB is presently battling in a federal appeals court for the right to look into claims of debanking. President Joe Biden chose Rohit Chopra as the agency’s head. 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.
In a win for the cryptocurrency sector, Trump said last week that he would name industry ally and venture capitalist David Sacks 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 go after your banks. He stated during the July Bitcoin 2024 Conference in Nashville, Tennessee, that they “choke off your financial services.” A month later, he declared his intention to establish the United States as the global center of crypto.
According to the Trump family, they have been debanked. After leaving the White House in 2021, Melania Trump claimed in her novel Melania that her longtime bank chose to close her account and forbid her son, Barron Trump, from opening one. According to Donald Trump Jr., he no longer has access to banking services.
A request for comment on the president-elect’s plans was not answered by a representative of the Trump transition team.
However, debanking is a problem that cuts across political boundaries. This month, Rep. Ritchie Torres, D-N.Y., wrote on X that debanking is a sneaky danger to American civil liberties, citing Andreessen’s remarks without citing any particular industry or instance.
Given that bitcoin has been founded on anarchist ideology and an outlaw image since its inception, the accounts of debanking may have a hint of irony. Developers of cryptocurrencies have long stated that they do not intend to rely on established financial institutions, but rather to replace them.
The extent of debanking’s prevalence is unclear. Last year, the Blockchain Association, a trade group for the industry, established a tip line for people who thought they had been debanked. According to the group, it has since discovered a pattern of over 30 specific instances of debanking or applications being rejected because of banking customers’ involvement in the digital asset market. It stated that it is still looking into the claims and refuses to provide specifics about those situations.
The Blockchain Association’s head of legal, Marisa Coppel, said in a statement that while we wait for answers to our FOIA requests, we’re looking into other measures to make sure the illegal debanking of our business stops.
The groups wrote to Trump last month requesting that he halt the debanking procedure, maybe through an executive order.
Andreessen did not offer any instances or proof of debanking connected to cryptocurrency in the conversation with Rogan. Nevertheless, his remark inspired others to share their own experiences of being denied access to financial services despite having good credit and without any justification. A business or a person’s personal life could be severely damaged by this circumstance.
Among others who raised their voices was Sid Kalla, co-founder of the New York-based cryptocurrency startup Roll Labs. His business, Turing Holdings, assists internet entrepreneurs in minting digital tokens that are subsequently traded online. Following his interview, Andreessen shared a picture of a cancellation notice he claimed to have gotten from Chase in May on X. According to Kalla, there had been a financial relationship for seven years, and the notice was regarding a business account.
During an interview, Kalla stated, “We tried to find out what happened.” We attempted to contact our banker via phone and email at the Brooklyn Heights branch, but nobody was able to peek behind the scenes. All of the staff were really pleasant, but they genuinely didn’t seem to understand why.
Payrolls for its 12 employees and contractors were delayed for three to four weeks, according to Kalla, because the firm did not have a checking account. 2.9 million people have viewed Kalla’s post on X.
Citing a policy against discussing specific accounts, Chase, a division of JPMorgan Chase, declined to comment on the circumstances surrounding Roll Labs.
Debanking, according to at least one bank sector trade association, is a genuine problem brought on by pressure from government authorities. The Bank Policy Institute, whose chairman is Jamie Dimon, the CEO of JPMorgan Chase, echoed Andreessen’s remarks by accusing bank regulators of implementing a covert enforcement system using government-appointed examiners who keep a tight eye on bank activities.
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.
Although a large portion of the cryptocurrency industry is still legal, the last few years have seen a number of scandals, including the imprisonment of the founders of trading platforms Binance and FTX and the government’s gradual erosion of areas it considers illegal, such as digital tokens that some regulators claim are identical to traditional securities. The Treasury Department claims that the North Korean government and Russian criminals have used a number of cryptocurrency companies, and the FBI reports that it received over 69,000 complaints about suspected cryptocurrency fraud last year.
The dispute over debanking could have significant consequences. Legislators and cryptocurrency investors have put forth what would effectively be a legal entitlement to financial services, and some lobbying groups have used the issue as a platform to attack other banking laws, like those pertaining to 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.
He stated in a statement, “My first goal is to reintroduce it, assemble the support base, and start working with the Trump administration on a rulemaking as soon as possible.” As more businesses and people are debanked, the coalition is expanding.
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.
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!