The Federal Deposit Insurance Corporation (FDIC) interim Chair, Travis Hill, made a significant announcement during a speech in St. Louis on Jan. 10, acknowledging the agency’s role in “debanking” crypto firms. Hill highlighted the concerning trend of crypto-related businesses losing access to banking services without any explanation, drawing parallels to historically debanked groups such as politically disfavored industries and individuals with controversial affiliations.
He emphasized that such actions are unacceptable and contradict the FDIC’s mission to reduce the number of unbanked Americans. Hill stated, “Efforts to debank law-abiding customers are unacceptable,” underscoring the importance of fair and inclusive banking practices.
These revelations shed light on what critics have dubbed as “Operation Chokepoint 2.0,” an alleged initiative by the Biden administration to impede the growth of the US crypto industry. Hill urged regulators to put an end to debanking practices and ensure that FDIC staff members do not engage in tactics that pressure banks to drop law-abiding customers.
Notably, the interim chair criticized the FDIC’s current cautious approach to crypto, describing it as stifling innovation. He highlighted the agency’s issuance of “pause” letters to over 20 banks, instructing them to halt crypto-related activities. These actions contributed to the perception that the FDIC is hostile toward blockchain and distributed ledger technologies.
In a call for a revamped digital asset strategy, Hill advocated for clear and transparent guidance on legally permissible activities and how to conduct them safely. He stressed the importance of outlining expectations upfront with public feedback, rather than resorting to piecemeal enforcement actions.
Moreover, Hill addressed the regulatory oversight of crypto-related activities like staking and lending, acknowledging that the FDIC’s cautious stance has hindered innovation. He urged regulators to provide timely approvals for activities that meet safety and soundness standards.
The interim chair also highlighted the compliance challenges posed by the Bank Secrecy Act (BSA), noting that banks often opt for account closures to avoid penalties for inadequate compliance. Hill called for a reevaluation of the BSA regime to ensure that it does not inadvertently harm law-abiding customers.
As the FDIC prepares for a leadership transition on Jan. 20, Hill emphasized the importance of a balanced approach to bank supervision, particularly in the realm of innovation and technology adoption. He proposed modernizing FDIC policies to align with the evolving financial landscape while upholding safety and soundness principles.
Hill expressed optimism about achieving a better balance in the coming months, suggesting that revitalizing the agency’s innovation lab, FDiTech, and fostering collaboration between regulators and the fintech industry could pave the way for positive change.