During the Biden Administration, policy was aligned against Fintech innovation, including digital assets. Banks were effectively warned not to engage in the crypto sector, something that led to some being debanked – a nefarious action of cutting out firms and individuals from the financial sector.
This week, as part of a dramatic transition to the pro-innovation Trump Administration, the Office of the Comptroller of the Currency (OCC) issued an interpretive letter confirming permissible bank activities related to riskless principal transactions in crypto-assets. The OCC noted that a national bank must conduct these activities safely and soundly and in compliance with applicable law.
The OCC stated that a national bank may “engage in riskless principal crypto-asset transactions as part of the business of banking. Such transactions involve a bank acting as principal in a crypto-asset transaction with one customer while simultaneously entering into an offsetting transaction with another customer. The bank serves as an intermediary and does not hold the crypto-assets in inventory, instead acting in a capacity equivalent to that of a broker acting as agent.”
As for state-regulated banks, the OCC noted that these banks have long engaged in riskless principal transactions involving securities, and that state regulatory frameworks concerning crypto-asset activities conducted by state banks are continuing to develop.
Today, the OCC released a preliminary review of Debanking. According to their research, the nine largest national banks that it supervises; JPMorgan Chase Bank, Bank of America, Citibank, Wells Fargo Bank, U.S. Bank, Capital One, PNC Bank, TD Bank, and BMO Bank all made “inappropriate distinctions among customers in the provision of financial services on the basis of their lawful business activities by maintaining policies restricting access to banking services or requiring escalated reviews and approvals before providing certain customers access to financial services.”
Earlier this year, President Trump issued an Executive Order effectively banning these discriminatory practices.
The EO states:
“Bank regulators have used supervisory scrutiny and other influence over regulated banks to direct or otherwise encourage politicized or unlawful debanking activities. “Operation Chokepoint,” for example, was a well-documented and systemic means by which Federal regulators pushed banks to minimize their involvement with individuals and companies engaged in lawful activities and industries disfavored by regulators based on factors other than individualized, objective, risk-based standards.”
Comptroller of the Currency Jonathan Gould said they were committed to providing visibility into the debanking activities and to halting these illicit practices.
“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. While many of these policies were undertaken in plain sight and even announced publicly, certain banks have continued to insist that they did not engage in debanking. Going forward, the OCC will hold banks accountable for these actions and ensure unlawful debanking does not continue.”
Unfortunately, it would be difficult to pursue legal action against these banks, as typically, it was fear of enforcement or disfavor from the Biden Administration that compelled them to take discriminatory actions.
The Preliminary Findings from the OCC’s Review of Large Banks’ Debanking Activities may be viewed here.