A report by House Republicans has revealed the extent of the Biden administration’s efforts to debank digital asset businesses and people who use cryptocurrency.
Under President Biden, federal regulators used vague rules, excessive discretion, informal guidance and aggressive enforcement actions to pressure banks away from serving digital asset clients, according to the report.
The aggressive tactics resulted in at least 30 digital asset entities or individuals losing access to financial services, it said.
House Committee on Financial Services Chairman French Hill of Arkansas and Oversight Subcommittee Chairman Dan Meuser of Pennsylvania spearheaded the report, which was compiled by staff on the committees.
Congressional Republicans and the Trump administration are scrutinizing the Biden administration’s efforts to pressure financial institutions into cutting off access to clients with conservative political views, branding those customers as a financial, legal or reputational risk to the financial institution.
The term “debanking” stems from derisking, which involves “terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk.”
The 53-page report is titled Operation Choke Point 2.0, a reference to the Obama Justice Department’s “Operation Choke Point,” which was intended to close down companies considered a high risk or otherwise objectionable by denying them access to the banking and payments networks every business needs to survive.
Although Republicans rolled back the regulations of Operation Choke Point, the report said, the Biden administration followed a similar game plan and ramped up financial regulations again against disfavored individuals and businesses — particularly digital asset clients.
The Trump administration’s financial regulators rescinded numerous Biden-era guidance, supervision and regulation letters, interpretive letters, and rules that fostered the debanking of the digital asset ecosystem by certain regulators.
“Targeting Americans over their political views erodes trust in the financial system and undermines the core freedoms our nation was founded on,” said Mr. Hill. “Under the leadership of President Trump, we’ve ushered in a new era for digital assets and look forward to reversing the damage done by the Biden Administration to prevent unlawful debanking.”
The financial regulators imposed informal pressure and issued guidance documents to discourage financial institutions from providing services to digital asset firms, the report said.
The Biden administration justified its actions by characterizing the digital asset ecosystem as an industry prone to market volatility and risk.
“Regulators often highlighted the risks posed by digital assets, specifically violations of anti-money laundering (AML) and countering the financing of terrorism (CFT) standards,” the report said. “However, the Biden Administration frequently undermined its argument by stating that the use of virtual assets for money laundering remains far below the scale of fiat currency and more traditional assets by volume and value of transactions.”
It said the Biden administration regulators took various actions to dissuade financial institutions from providing services to digital asset firms, when Congress was working to create clear regulatory guidance for digital assets.
For example, the Federal Reserve’s vice chair for supervision discouraged banks from engaging in digital asset-related activities through policy statements, supervision and regulation letters, and created the Novel Activities Supervision Program to oversee digital asset-related activities conducted by supervised banking organizations.
The Federal Deposit Insurance Corp. sent “pause” letters to financial institutions, which effectively encouraged them to stop efforts to engage in digital asset-related activities. This delay tactic — and the FDIC’s voluminous document requests — made it impossible for financial institutions to pursue digital asset-related activities, the report said.
The Office of the Comptroller of the Currency is known to require regulated institutions to demonstrate they have adequate controls in place when engaging in various activities.
According to the report, during the Biden-era OCC layered on additional red tape for digital asset-related activities, for example, by mandating that each supervised institution obtain a non-objection letter before engaging in such activities.
The staff report also said the Securities and Exchange Commission refused to create a clear, functional regulatory regime overseeing digital assets and instead used enforcement tactics to target digital asset firms.
“On several occasions, the SEC exceeded its statutory authority to curtail digital asset activity, which was contrary to the SEC’s mission to protect investors and promote capital formation,” it said.
In July, Mr. Trump fulfilled one of his top legislative goals when he signed into law new cryptocurrency regulations that added legitimacy to the crypto-trading business.
Republican lawmakers and crypto industry leaders surrounded Mr. Trump in the East Room of the White House when he signed the Genius Act, which created the first comprehensive regulatory framework for stablecoins, a type of digital currency pegged to fiat currency like the dollar.
The president said the entire crypto community was “mocked and dismissed and counted out” during the Biden years, enduring lawsuits and federal scrutiny.
“This signing is a massive validation of your hard work and your pioneering spirit and your ability to never give up,” he said.
Mr. Trump recalled that during the 2024 campaign, he was the first presidential candidate in history to address the Bitcoin Conference.
“And at that time, crypto builders and founders were under relentless assault by the Biden administration, which was trying to crush your industry. … I got the greatest applause of the whole campaign. We fired Joe Biden’s SEC chair, Gary Gensler. We fired him,” he said to applause from the guests in the East Room.
• Kerry Picket can be reached at kpicket@washingtontimes.com.
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