The practice of “debanking” has emerged once again, with reports that JP Morgan (NYSE:JPM) is pursuing the discriminatory practice.
Debanking was prevalent during the Biden years. Effectively, banks would sever relationships with individuals or entities deemed unsavory for political views or activities out of favor with the administration. Crypto firms and affiliated individuals were targets of the practice. A portion of this activity had to do with regulatory pressure from federal agencies, setting a message for financial firms that implied regulatory risk for doing business with the targets.
Senator Cynthia Lummis, an advocate of digital asset innovation, posted on X yesterday that “Operation Chokepoint 2.0 regrettably lives on.” The Senator was referring to JP Morgan cutting off services to Strike CEO Jack Mallers.
Mallers reportedly had his personal banking accounts terminated without explanation. Mallers posted on X that JPM “threw me out of the bank.”
“It was bizarre. My dad has been a private client there for 30+ years. Every time I asked them why, they said the same thing: “We aren’t allowed to tell you”.
To memorialize JP Morgan’s action, Mallers had the cancellation letter framed.
The letter from the bank states that, “during the course of ongoing monitoring, we identified concerning activity on your account or an account that you are associated with.”
JP Morgan said they are “committed to regulatory compliance” without providing any details on the alleged activity.
The letter did not claim any nefarious actions by Mallers.
Zero Hedge, always quick with a bit of financial wit, noted that JP Morgan had no problem banking Jeffrey Epstein, but for some reason had an issue with a crypto CEO.
The discriminatory practice of debanking was thought to be put to rest following an Executive Order by President Donald Trump. Before the EO was issued, Congress was working on legislation to ensure that Debanking for the wrong reasons was ended, but President Trump beat Congress to it.
The EO states that bank regulators have used supervisory scrutiny to encourage “politicized or unlawful debanking activities.” To halt these actions, the EO declared:
“It is the policy of the United States that no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views, and to ensure that politicized or unlawful debanking is not used as a tool to inhibit such beliefs, affiliations, or political views. Banking decisions must instead be made on the basis of individualized, objective, and risk-based analyses.”
While debanking is a shameful activity, it is not clear if debanking triggers civil or criminal legal prosecutions.
This all may be moot in the not-so-distant future as the crypto sector replaces old banks, which are slow to adapt but quick to step on a landmine. Hopefully, JP Morgan reconsiders its errant decision.