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US President Donald Trump is said to be preparing to sign an executive directive instructing banking regulators to examine allegations of debanking made by the cryptocurrency sector and conservative groups.
The banking regulators would be tasked with investigating whether any financial institutions breached antitrust, consumer protection, or fair lending laws, based on a draft of the executive directive reviewed and reported by The Wall Street Journal on Monday.
Entities found to be in violation of the laws may incur fines or other legal measures. Trump is anticipated to sign the order this week, according to reports, though the White House could postpone or modify the plan.
Executives in the crypto industry have long asserted that the Biden administration colluded to sever crypto from the financial network by utilizing regulators to pressure banks into distancing themselves from clients engaged in digital assets.
Executive directive to initiate regulatory reform
The draft directive reportedly commands bank regulators to eliminate any of their policies that may have led to banks dropping specific clients, including crypto businesses.
It further instructs the US government’s Small Business Administration to examine banking practices that secure the loans issued by the agency to small enterprises.
The order requests regulators to refer certain potential violations to the Attorney General for the Department of Justice to pursue further action.
The Journal mentioned in June that the White House was considering a similar order aimed at preventing banks from discontinuing services to sectors like crypto.
“Operation Choke Point 2.0” allegations
Crypto leaders assert that former President Joe Biden began to isolate their sector from banking in late 2022, following the downfall of FTX, which was revealed to be a significant fraud.
Coinbase’s chief legal officer, Paul Grewal, testified at a Congressional session in February, claiming that the Biden administration’s Federal Deposit Insurance Corporation (FDIC) “intimidated the banks” with audits and questioning about crypto and stablecoins until they “yielded under the strain.”
A Coinbase-backed Freedom of Information Act lawsuit against the FDIC revealed that the agency urged certain financial institutions to suspend crypto banking operations, which Grewal stated underscored that the industry’s assertion “wasn’t merely a crypto conspiracy theory.”
Crypto venture capitalist Nic Carter coined the phrase “Operation Choke Point 2.0” in February 2023 to capture the perceived debanking trend, drawing inspiration from the Justice Department’s “Operation Choke Point” against banks and payday lenders during the 2010s.
Trump’s order to also investigate alleged political debanking
The directive will also likely investigate the involvement of banks in allegedly denying or terminating services to political conservatives.
Related: White House crypto regulations offer SEC-CFTC clarity for US crypto businesses: Attorney
The draft did not identify any specific banks but did critique the role of financial institutions reportedly assisting federal investigators with inquiries into the Jan. 6, 2021, riots at the US Capitol, as per the Journal’s report.
Conservatives have also asserted that banks have refused them services based on their political convictions.
The banking sector refers to this practice as “derisking,” and financial institutions possess wide latitude to terminate accounts, regardless of whether the account holder presents a legal, financial, or reputational danger to the firm.
The Federal Reserve declared in June that it would cease examining for reputational risk following similar actions by the Office of the Comptroller of the Currency and the FDIC.
Legal Panel: Crypto sought to dismantle banks, now it’s evolving into them in stablecoin conflict
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