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US President Donald Trump is poised to endorse an executive order on Thursday commanding federal banking regulators to pinpoint and penalize financial entities that have partaken in “debanking.”
As reported by Bloomberg on Thursday, referencing a senior White House official, regulators are mandated to analyze complaint data, while financial institutions governed by the Small Business Administration will be urged to make efforts to restore clients who were wrongly denied banking services.
Debanking has been a significant issue among certain political factions, who contend that businesses such as firearms producers and fossil fuel corporations have been denied financial services for ideological motives.
This was also a frequent grievance among cryptocurrency enterprises. During the term of former President Joe Biden, allegations surfaced of a new program labeled “Operation ChokePoint 2.0,” which some speculated was an attempt to push crypto businesses overseas during the 2022 downturn.
Notwithstanding the shift in rhetoric under the Trump administration, claims of debanking have continued.
According to Bloomberg, the executive directive will require regulators to remove the “reputational risk” classification from guidance and training resources. Detractors assert that this classification was utilized to unjustly target crypto firms.
Related: From debanking to a banking arms race: The emergence of stablecoins
A coalition of banks seeks to hinder crypto banking applications
As the Trump administration strives to conclude debanking, a consortium of influential banking associations is working to obstruct several crypto firms, including Ripple, from acquiring banking licenses.
As indicated in a communication to the Office of the Comptroller of the Currency (OCC) dated July 17, the American Banking Association, Consumer Bankers Association, National Bankers Association, America’s Credit Unions, and Independent Community Bankers of America aim to prevent banking applications from four digital asset providers, including Ripple and Fidelity.
In their correspondence, the associations assert that “there are substantial policy and legal inquiries regarding whether the Applicants’ proposed business plans encompass the types of fiduciary activities traditionally conducted by national trust banks.” Furthermore, the associations claim that the “public segments of the Applications do not facilitate substantial public oversight.”
Ripple, the developers of cryptocurrency XRP (XRP), submitted a request for a banking license on July 2. The request was made shortly after Circle, the producer of stablecoin USDC (USDC), applied to form a national trust bank to manage its stablecoin reserves.
The applications underscore the increasing intersection between conventional financial institutions and indigenous crypto firms, heightening competition throughout the financial services sector.
Stablecoin enterprises, in particular, have introduced innovative payment methodologies, which may conflict with the frameworks established by traditional banks and credit card firms. The GENIUS Act, a US legislative measure to regulate stablecoins and their issuers, was enacted on July 18.
Magazine: Legal Panel: XRP victory leaves Ripple as a ‘bad actor’ without established crypto legal precedence
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