OPINION:
In the spring of 2013, the Obama Justice Department launched an initiative known as “Operation Choke Point,” which pressured banks to close accounts with oil companies, payment processors, and gun manufacturers – businesses the Obama Administration saw as undesirable. Republicans and Democrats alike look back on this operation as a shameful example of what happens when regulators restrict banking due to the political whims of the White House.
A decade later, the Biden Administration is pulling from the same playbook to subvert free enterprise via shadow banking. This time, the victim is the crypto industry.
Since the new year, the Biden White House and its banking regulators have issued a series of misguided statements as part of a coordinated effort to reduce crypto’s access to banking. One of the first was a joint statement from the Federal Reserve, FDIC, and OCC that warned banks against holding crypto assets. Next was a roadmap laying out the risks of crypto.
The statements show the Administration doesn’t understand this technology. They focused solely on the risk of crypto assets, without acknowledging even a single one of the abundant rewards brought by an industry that employs tens of thousands of Americans and is tackling major problems, such as providing financial access to the unbanked and underbanked.
The public statements, however, are just the tip of the iceberg. In the real world, banks are feeling even greater pressure from the unelected agency bureaucrats who directly implement the bank supervisory process. These bureaucrats, acting on behalf of the banking regulators, are effectively discouraging banks from providing basic banking services to crypto companies. As a result, New York’s Metropolitan Commercial Bank is closing its crypto business, and Signature Bank, one of crypto’s leading banks, is drastically reducing the amount of crypto clients that it services.
By making sweeping and reckless generalizations and pressuring banks behind closed doors against servicing crypto, these regulators have taken on the role of shadow bank executives, circumventing legitimate policymaking procedures to de-bank crypto in an authoritarian and politically-motivated power grab. Legitimate, legal businesses are losing their bank accounts as a result.
Perhaps more problematically, the regulators are gutting the assets of everyday Americans – roughly 20% of us – who have bought crypto, because crypto’s access to banking is being impeded by unaccountable regulators. The irony of regulators damaging everyday Americans in the name of protecting them is almost a parody of Washington, but it’s true.
Whatever your interest in cryptocurrency, the actions of unaccountable regulators should scare you. Not only is the Administration effectively resigning the U.S. from the race to grow the crypto and web3 sector here at home – along with the security, leadership, jobs, and economic benefits that come with setting the standard – but this regulatory shadow banking is a blatant subversion of our democratic values. Policymaking is supposed to be done by policymakers in open forums, not in one-off regulatory actions.
These actions also set a dangerous precedent that could harm American consumers and their individual liberties for years to come. This is the second time in less than a decade that Democrats have pulled this. It goes to reason they will do it again. Oil, gas, and firearm companies were targeted in the first iteration and could find themselves at renewed risk as Biden pursues aggressive agendas against these industries. Democrats should not have the power to de-bank their disfavored industry every time they are in the White House.
This, ultimately, is not a partisan issue. It’s an American one. One party’s view of an industry should not dictate that industry’s fair access to financial services. That’s bad banking policy that threatens the core of our economic system and values.
To be clear, this is a blatant violation of American economic liberties and our right to choose who we do business with. At crypto’s roots is the ambitious goal of open access to financial services without the unrestrained hand of big government getting in the way. It is shameful and backward for Washington’s entrenched regulatory state to work in the shadows against that goal. As crypto businesses inevitably move overseas, it will be American workers and consumers who are left in the lurch.
None of this is to say that servicing crypto comes without risk. Nearly all investments carry some risk – banks know that. They are trained to assess that risk and make educated decisions on how to appropriately manage it. If a bank decides that a crypto enterprise fits their criteria for investment, loan or a business partnership, that is their right. And it is their right alone.
Republicans in Congress should stand up for their constituents and call out the Biden regulators’ overreach. Force the regulators out of the shadows. Send letters, make floor speeches, hold hearings, and talk to the press. Make fixing this part of the appropriations process. Don’t let this violation of fair access and American values continue in the dark. If regulators are serious about protecting consumers, they should work with Congress and all stakeholders to develop fair legislation that provides guidelines for managing risk without doing irreparable harm to a promising young industry. But it should happen with the best interests of American consumers and freedoms in mind through legislation, debate, and a transparent vote by our elected officials.
Legislators, not regulatory bureaucrats, make laws. It needs to stay that way.
- David McIntosh is President of The Club for Growth and a former Congressman representing Indiana’s 2nd Congressional District.
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