Conspiracy to Debank Crypto Companies? The Blockchain Association is taking action
The Blockchain Association, a US-based non-profit trade association for the blockchain and cryptocurrency industries, has submitted Freedom of Information Act (FOIA) requests to the Federal Reserve (Fed), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), is 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 the Blockchain Association.
Reports of cryptocurrency firm debanking have increased, with many companies closing their bank accounts without notice and without explanation. The reports are troubling, 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 by Regulators: A Timeline
The move by the Blockchain Association follows several recent hostile actions by regulators.
On 3 Januarythe banking supervisors issued a joint statement warning of “key risks associated with cryptoassets and participants in the cryptoasset sector,” which may have been the start of their banking efforts.
On January 27the Fed issued a statement saying so Banks cannot engage in “crypto-asset-related activities” such as issuing or holding crypto as principal.
On February 7, The Fed published it as a final rule, despite not following a valid rulemaking process. At the same time, the Fed rejected a membership application from Caitlin Long’s Custodia Bank, citing “concerns regarding the increased risk associated with its proposed crypto activities“, although Custodia planned to hold 108% reserves.
Finally, on 23 Februarythe regulators published another joint statement, saying that crypto companies “may pose increased liquidity risk” that banks must deal with. Although the statement ends by saying “debank crypto”, the implication is clear.
Disturbing reports
In addition to the regulators’ own statements, there have been many reports of debanking from Congress and in the media.
On March 9Senator Hagerty, along with Senators Mike Crapo, Thom Tillis and Steve Daines, sent a letter to the regulators saying that the “seems the desired outcome from the banking regulators is… de-banking the crypto industry in America.”
On March 12, Signature Bank was seized by the NYDFS and turned over to the FDIC, although board member and former Representative Barney Frank said the bank remained solvent. He said that regulators only “wanted to send a message to get people away from crypto.”
On March 15, GOP Majority Whip Tom Emmer sent a letter to the FDIC, calling out the regulators’ “demonstrated efforts to choke digital assets from the US financial system.” Brian Brooks, former head of the OCC, shared his view that “there has been a decision across the banking regulatory agencies … that crypto is inherently risky and needs to be removed from the banking system.”
Illegal acts
Jake Chervinsky argued that there is no valid reason to reject crypto companies. They are like any other legitimate company that needs bank accounts to operate. They hold dollars to pay rent, wages and taxes. If regulators debank 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’s true.
Blockchain Association’s FOIA Requests
The Blockchain Association’s FOIA requests require certain documents related to the debanking of crypto companies, such as instructions to banks to close accounts, coordination between the regulators and the closing of Signature Bank. The requests may take a long time to receive a response, 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 encourages the public to share their debanking stories via email [email protected]. The association wants to hear from those who have had their bank accounts closed, those who tried to open a new account and were refused, and those who work in banks and had contact with the supervisory authorities.
Chervinsky’s claim that debanking the crypto industry is illegal raises questions about the motives of regulators.
