Representative Patrick McHenry, Chairman of the House Financial Services Committee, has joined with Representatives French Hill, Digital Assets, Financial Technology, and Inclusion Subcommittee Chairman, and Bill Huizenga, Oversight and Investigations Subcommittee Chairman, to send letters to federal agencies demanding information on the move to de-bank digital asset firms.
The three Republican House members have forwarded letters to the Chair of the Board of Governors of the Federal Reserve System, Jerome Powell, Chairman of the Federal Deposit Insurance Corporation (FDIC), Martin Gruenberg, and Acting Comptroller of the Currency, Michael Hsu.
The letters have been composed due to recent coordinated events by these agencies to caution banks on their relationships with crypto firms. The supposition is that coordinated efforts by these agencies have denied banking services to digital asset firms.
The letters follow a previous request for information from the FDIC, Treasury Department, Federal Reserve, and Office of the Comptroller of the Currency’s actions and agenda toward the digital asset ecosystem.
The letters to each agency overlap, referencing previous alleged attempts by these entities working together to “covertly coerce and pressure financial institutions they supervised to cease banking relationships with customers they deemed risky.”
Alluding to events that took place during the Obama administration, which are said to have targeted gun dealers, pawn shops, tobacco stores, and payday lenders, the Representatives said it took Congress to halt the regulatory actions focused on “politically disfavored industries.
The letters state
“Today, we are seeing the resurgence of coordinated action by the federal prudential regulators to suppress innovation in the United States. There is no clearer example than in the digital asset ecosystem. Since 2021, the federal prudential regulators appear to have taken steps to discourage banks from providing services to digital asset firms and related entities. Soon after taking office, the Biden Administration stopped a rule designed to specifically prevent the improper activity from happening again. On November 18, 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.”
Adding:
“Later, in April 2022, the FDIC similarly directed all FDIC-supervised institutions to provide the FDIC in writing their intent to engage in or with digital asset-related activities. The FDIC expressed its guidance as necessary to guard against risk. It suggested that ‘crypto-related activities’ could ‘pose significant safety and soundness risks, as well as financial stability and consumer protection concerns.’ Finally, in January of this year, the Fed, FDIC, and OCC, issued a joint statement warning against providing banking services to ‘crypto-asset sector participants.’ Given these actions by the federal prudential regulators, it is not hard to imagine why a bank would be hesitant to offer banking products and services to digital asset firms.”
The letter continues to state that digital asset activity is not inherently risky, pointing to FTX that collapsed due to “run of the mill fraud.”
At the same time, Silicon Valley Bank and Signature Bank were not taken down by crypto but by something more mundane – interest rate risk and a tech-fueled run on the bank.
The Representatives claim that “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.”