On 26th April, three Republican Party lawmakers of the United States House of Representatives Financial Services Committee sent letters to the United States banking regulatory agencies. They sent the letter seeking information on potential coordinated efforts taken against digital asset firms.
The letter was sent to the Chair of the Board of Governors of the Federal Reserve System, Jerome Powell, Chairman of the Federal Deposit Insurance Corporation (FDIC), Martin Gruenberg, and Acting Comptroller of the Currency, Michael Hsu. Lawmakers have demanded information regarding the coordinated efforts by the agencies to deny banking services to digital assets firms. At the beginning of the letter Chairman Powell recalled the Obama Administration’s Operation Choke Point which encouraged banks to deny services to a few specific types of businesses.
For those who are not aware, Operation Choke Point was a US Department of Justice operation that looked into US banks’ dealings with payday lenders, gun dealers, and other businesses that were deemed to be highly susceptible to fraud and money laundering starting in 2013. The letter also elaborated on a wide range of topics like how the resurgence of coordinated action by federal prudential regulators to suppress innovation in the United States. Additionally, it also says that since 2021, federal prudential regulators seem to have taken steps to discourage the banking sector from providing services to digital assets and related firms.
The digital assets management issue is currently the most debatable topic in the United States. A comprehensive policy seems very confusing however, in November 2021 the Office of the Comptroller of the Currency (OCC) released guidelines encouraging banks to only provide services when they provide a written statement and assurance of a “safe and sound manner”.
Federal prudential regulators remained very active in providing proper guidelines on the management of digital assets and their supervision from time to time. In April 2022, the Federal Deposit Insurance Corporation (FDIC) directed all FDIC-supervised institutions to provide the FDIC with their intentions in writing to engage in digital assets-related entities. Additionally, the lawmaker’s letter shows a positive intent and said, “Digital asset activity is not inherently risky.” It also mentioned that there was no involvement of digital assets in the collapse of the Silicon Valley Bank.
There are several drawbacks where digital assets firms could face difficulty to perform their day-to-day operations. Additionally, it will force these firms to shift their destination out of the United States and establish themselves in another region where they will witness better working conditions. Also, potential de-banking could be detrimental in economic terms too, for example, it will cause mass job losses in the United States. According to lawmakers, it may also impact the growth and innovation of the country.