US Congress to Investigate Crypto Industry Debanking by Financial Regulators During Biden Administration

An investigation in the U.S. House of Representatives and a hearing in the Senate will examine whether financial regulators during the administration

The U.S. House of Representatives and Senate will investigate whether financial regulators during the administration of former President Joe Biden deliberately cut off crypto industry leaders and others from the banking system in an inappropriate use of authority.

A Senate Banking Committee hearing on the matter is scheduled for Feb. 5, while the House Oversight Committee is sending letters to crypto company executives.

The investigation comes amid complaints from the digital assets industry that banks are cutting them off without explanation, while regulators say they were putting the brakes on crypto banking activities due to the risks involved.

The House committee is investigating whether regulators are putting 'implicit or explicit pressure' on banks to stop working with crypto firms, Comer said.

WASHINGTON, D.C. – The U.S. House of Representatives and Senate will investigate whether financial regulators during the administration of former President Joe Biden deliberately cut off crypto industry leaders and others from the banking system in an inappropriate use of authority.

A Senate Banking Committee hearing on the matter is scheduled for Feb. 5, while the House Oversight Committee is sending letters to crypto company executives. The investigations will delve into the systemic severing of crypto insiders from U.S. banks, a move that has been dubbed "Operation Chokepoint 2.0" by Republican lawmakers and the digital assets industry.

The term references an earlier era's Operation Chokepoint — a government-sanctioned effort to reduce risk in banking by encouraging the lenders to back away from legal but otherwise risky businesses. Now, Republicans allege that the Biden administration is using a similar tactic to target crypto and conservative interests.

"Debanking is un-American — every legal business deserves to be treated the same regardless of their political beliefs," said Senate Banking Committee Chair Tim Scott (R-S.C.), who took over the gavel earlier this month. "Unfortunately, under Operation Chokepoint 2.0, Biden regulators abused their power and forced financial institutions to cut off services to digital asset firms, political figures, and conservative-aligned businesses and individuals."

The committee will examine the 'debanking practice' in the upcoming hearing, Scott said in a statement on Friday.

The House Oversight Committee, meanwhile, is delving into the struggle of crypto executives and businesses to maintain banking relationships. In a letter dated Jan. 24, the committee chairman, Representative James Comer (R-Ky.), requested information from the founders and CEOs of several crypto companies and organizations, including Coinbase (NASDAQ:COIN), Lightswap and Uniswap Labs.

"This Committee is investigating whether this debanking practice originates from the financial institutions themselves or from either implicit or explicit pressure from government regulators," Comer wrote in the letter, which is also addressed to executives at Swan Bitcoin, OpenSea and Dapper Labs.

The committee is asking for details on any communications with banking regulators, the Federal Deposit Insurance Corp. or the Office of the Comptroller of the Currency regarding the termination of banking services. It also wants to know whether the companies experienced any difficulties in opening new bank accounts.

The letters come amid complaints from the crypto industry that banks are cutting them off without explanation, while regulators say they were putting the brakes on crypto banking activities due to the risks involved.

The challenge of pinning the lack of banking options entirely on the government is that some financial institutions may have made decisions based on their own risk appetites or business plans that deliberately steered clear of crypto interests. And banking regulators such as the FDIC and the OCC were public in their guidance that regulated banks seeking to do crypto business would face restrictions and additional scrutiny from the agencies.

However, a Coinbase pursuit of private FDIC communications with banks demonstrated that the agency directed them to stop pursuing digital assets services until the regulator had specific rules in place, which it wasn't developing.

"We are grateful to assist in the thorough investigation of this pernicious practice,” said Kristin Smith, CEO of the Blockchain Association, which also received the House committee's letter probing the trend.

Meanwhile, congressional Democrats have been focusing their own investigation requests on President Donald Trump's recently launched meme coin, $TRUMP. He's been accused of using the presidency to rack up billions of dollars, and they cite the token as a potential risk for dangerous conflicts of interest.

The House Financial Services Committee announced a hearing on the issue late Friday, scheduled for Thursday, Feb. 6.