Three US lawmakers have sent letters to the heads of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) demanding information on potential coordinated efforts by the agencies to deny banking services to digital asset firms and the ecosystem as a whole.
In a joint statement, House Financial Services Committee Chairman Patrick McHenry (Republican), Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill (Republican), and Oversight and Investigations Subcommittee Chairman Bill Huizenga (Republican) accused the regulators of taking steps to suppress innovation in the US.
“Since 2021, the federal prudential regulators appear to have taken steps to discourage banks from providing services to digital asset firms and related entities,” the statement read. The lawmakers pointed out that digital asset activity is not inherently risky and that the collapse of some firms in the industry was due to fraud rather than the riskiness of digital assets and related activities.
The actions of the Fed, FDIC, and OCC do not appear to be in reaction to recent events or the result of a sudden desire to protect financial institutions from risky behavior, but instead suggest a coordinated strategy to de-bank the digital asset ecosystem in the United States. This could have a detrimental effect on the industry and limit the ability of digital asset firms to access banking services, hindering innovation and growth.
This reaction comes after a request for information was made in March regarding the agencies’ actions and agenda toward the digital asset ecosystem moving forward. The lawmakers also cited a similar scheme launched in 2012 by the Obama administration, where the FDIC, OCC, and Fed worked together to coerce and pressure financial institutions to cease banking relationships with customers deemed risky.
The FDIC and OCC have issued guidance on providing banking services to digital asset firms in recent months. In November 2021, the OCC issued guidance encouraging banks to only provide services related to digital assets if they can assure regulators in writing that they can provide the services in a “safe and sound manner” and the regulators provide a written non-objection. In April 2022, the FDIC directed all FDIC-supervised institutions to provide the FDIC in writing their intent to engage in or with digital asset-related activities, citing potential safety and soundness risks, financial stability, and consumer protection concerns.
They have urged the regulatory heads to provide information on their efforts related to the digital asset ecosystem and to explain why banks are hesitant to offer banking products and services to digital asset firms.
In March, Representatives Patrick McHenry and Richie Torres reintroduced the Keep Innovation in America Act, first introduced in March 2021. The representatives claim that it fixes reporting requirements for digital asset firms. They reportedly reintroduced the bill in the wake of the regulatory war on crypto that threatens to send talent overseas.
Digital asset firms could find it challenging to access banking services, which are crucial for their day-to-day operations. This could result in the industry moving offshore, leading to job losses and a decline in US innovation in this space. The potential de-banking of the digital asset ecosystem in the US could have a significant impact on the industry, hindering innovation and growth, as pointed out by the lawmakers.