Conspiracy to Debank Crypto Companies? Blockchain Association Takes Action
The Blockchain Association, a US-based non-profit trade association for the blockchain and cryptocurrency industry, has sent Freedom of Information Act (FOIA) requests to the Federal Reserve (the Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), seeking information about the sudden closure of bank accounts held by cryptocurrency companies. This was revealed in a recent tweet by Jake Chervinsky, Chief Policy Officer of Blockchain Association.
Reports of debanking of cryptocurrency firms have been increasing, with many companies having their bank accounts closed without notice and without explanation. The reports are concerning, especially after the failures of Silvergate, Silicon Valley Bank, and Signature Bank. The trend suggests that regulators are trying to remove cryptocurrency companies entirely from the banking system.
Hostile actions from regulators: A Timeline
The move by the Blockchain Association follows several recent hostile actions from regulators.
On 3 January, the banking regulators issued a joint statement warning of “key risks associated with crypto-assets and crypto-asset sector participants,” which may have been the start of their debanking effort.
On 27 January, the Fed issued a statement saying that banks cannot conduct “crypto-asset-related activities” like issuing or holding crypto as a principal.
On 7 February, the Fed published it as a final rule, despite not following a valid rulemaking process. At the same time, the Fed denied a membership application from Caitlin Long’s Custodia Bank, citing “concerns regarding the heightened risks associated with its proposed crypto activities,” even though Custodia planned to hold 108% reserves.
Finally, on 23 February, the regulators published another joint statement, saying that crypto companies “may pose heightened liquidity risks” that banks must manage. Although the statement stops short of saying “debank crypto,” the implication is clear.
In addition to the regulators’ own statements, there have been many reports of debanking from Congress and in the media.
On 9 March, Senator Hagerty, along with Senators Mike Crapo, Thom Tillis, and Steve Daines, sent a letter to the regulators, stating that it “appears that the desired outcome from the banking regulators is…the de-banking of the crypto industry in America.”
On 12 March, Signature Bank was seized by NYDFS and turned over to the FDIC, even though board member and former Rep. Barney Frank said the bank was still solvent. He said regulators just “wanted to send a message to get people away from crypto.”
On 15 March, GOP Majority Whip Tom Emmer sent a letter to the FDIC, calling out the regulators’ “demonstrated effort to choke off digital assets from the United States financial system.” Brian Brooks, former head of the OCC, shared his view that “there has been a decision across the bank regulatory agencies…that crypto is inherently risky and needs to be extricated from the banking system.”
Jake Chervinsky argued that there is no valid reason to debank crypto companies. They are like all other law-abiding companies that need bank accounts to operate. They hold dollars to pay rent, salaries, and taxes. If regulators are debanking crypto companies, they are breaking the law.
In all of their statements, the regulators have said that banks “are neither prohibited nor discouraged from providing banking services to customers of any specific class or type.” The Blockchain Association wants to know if that is true.
The Blockchain Association’s FOIA Requests
The Blockchain Association’s FOIA requests are demanding certain documents related to the debanking of crypto companies, such as instructions to banks to close accounts, coordination among the regulators, and the closure of Signature Bank. The requests may take a long time to get responses, but the Association intends to pursue them aggressively and share the information as soon as possible.
The Association’s Appeal to the Public
The Blockchain Association is calling on the public to share their stories of debanking by emailing [email protected]. The Association wants to hear from those who had a bank account closed, those who tried to open a new account and were refused, and those who work at a bank and had contacts with regulators.
Chervinsky’s assertion that debanking the crypto industry is illegal raises questions about the motives of regulators.