Crypto Firms Left Out as 9 Major Banks Cut Ties: US Regulator Reports

The Role of Major US Banks in Restricting Financial Services

Between 2020 and 2023, the nine largest U.S. banks reportedly restricted financial services to industries considered politically contentious, including cryptocurrency. This revelation comes from preliminary findings by the Office of the Comptroller of the Currency (OCC). According to the regulator, these banks made "inappropriate distinctions among customers in the provision of financial services on the basis of their lawful business activities" over the three-year period.

The OCC's report indicates that major banks either implemented policies that limited access to banking services or required additional reviews and approvals before providing financial services to certain customers. However, the specific details of these policies were not disclosed.

This investigation was initiated following an executive order signed by former President Donald Trump in August, which directed a review of whether banks had debanked or discriminated against individuals based on their political or religious beliefs.

Industries Affected by Banking Restrictions

In addition to cryptocurrency, several other sectors faced restrictions from banks. These include oil and gas exploration, coal mining, firearms, private prisons, tobacco and e-cigarette manufacturers, and adult entertainment.

Regarding the cryptocurrency sector, the OCC noted that banks imposed restrictions on "issuers, exchanges, or administrators," often citing concerns about financial crime. These actions have raised questions about the fairness and transparency of banking practices toward certain industries.

Reactions from Industry Leaders

Comptroller of the Currency Jonathan Gould expressed concern over the banks' actions, stating, "It is unfortunate that the nation’s largest banks thought these harmful debanking policies were an appropriate use of their government-granted charter and market power." He added that while many of these policies were public knowledge, some banks continued to deny engaging in such practices.

The OCC examined the largest national banks it regulates, including JPMorgan Chase, Bank of America, Citibank, Wells Fargo, US Bank, Capital One, PNC Bank, TD Bank, and BMO Bank. The agency is continuing its investigation and may refer its findings to the Justice Department.

Criticisms of the OCC Report

Despite the findings, some industry experts have criticized the OCC's report for not addressing all aspects of the issue. Nick Anthony, a policy analyst at the Cato Institute, stated that the report "leaves much to be desired" and did not mention "the most well-known causes of debanking."

Anthony pointed out that the report criticizes banks for cutting ties with controversial clients but fails to address how regulators assess banks' reputations. He also highlighted that the Federal Deposit Insurance Corporation (FDIC) had explicitly advised banks to avoid cryptocurrency companies, which may have contributed to the situation.

Political and Regulatory Context

Earlier this month, Republicans on the House Finance Committee reported that the FDIC's "pause letters" under the Biden administration played a role in the debanking of the digital asset ecosystem. Caitlin Long, founder and CEO of Custodia Bank, argued that the FDIC and Federal Reserve were the main culprits behind crypto-related debanking during the Biden administration, rather than the OCC.

Long noted that the OCC's report focuses only on large banks, suggesting that smaller and mid-sized banks were more actively involved in restricting crypto-related services. She emphasized that crushing crypto was not a priority for large banks in the same way it was for smaller institutions.

Ongoing Implications

The debate over the role of banks in restricting financial services to certain industries continues to evolve. As regulatory scrutiny increases, the impact on various sectors—especially cryptocurrency—remains a topic of significant discussion. The ongoing investigations and reports will likely shape future banking policies and practices.