FDIC Chief Throws Open the Agency's Crypto Files, Rips Past 'Disgusting' Stance

Travis Hill, the acting FDIC chairman tapped by President Donald Trump, has thrown open more of the agency's past documents and said the U.S.

A U.S. Senate hearing was held on Wednesday to discuss the issue of banks terminating service to crypto clients, a practice known as "debanking." The interim head of the Federal Deposit Insurance Corp. (FDIC) revealed more correspondence in which officials steered banks away from crypto business.

The acting FDIC chairman, Travis Hill, disclosed that the banking regulator will be reconsidering its past crypto guidance. The guidance deliberately kept banks at a distance from crypto, which was largely unregulated and experienced significant volatility.

Hill stated that the FDIC will be "providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles."

The court had directed the regulator to share more information in a Freedom of Information Act battle between Coinbase and the agency over past letters between the FDIC and the bank.

The acting chairman characterized the agency as deliberately making it impossible for banks to handle crypto business.

"Requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity," he said.

Hill will run the FDIC until Trump puts forward a permanent candidate.

When the Senate hearing began, Chairman Tim Scott called the situation at the FDIC a "disgusting and disheartening picture of abuse" and praised Hill's actions.

At the hearing, Nathan McCauley, the co-founder and CEO of Anchorage Digital, a federally chartered crypto bank, shared his account of Anchorage being severed from banking relationships due to regulatory pressure.

"To say this is pervasive is an understatement," he told the senators in his testimony. "It's been across the entire industry, everybody has dealt with this."

He called it so common that "it became background noise" in which it was "just assumed that if you were a crypto company, you would have trouble getting bank services."

He contended that the pressure from regulators ran counter to what U.S. bankers actually wanted to do in the digital assets sector.

"All of the big banks wanted to work with crypto and were scared away from it by the regulatory apparatus," he said.

Senator Elizabeth Warren sought to highlight the other segments of the U.S. population that are routinely blocked from banking services. But she did agree with McCauley's central point.

"I don't think for a second that you should be locked out of our banking system," she said. "In many cases, it is wrong for banks to close accounts and threaten your ability to make payroll or pay rent on time without even providing an explanation, so long as you are following the law."

The congressional review of debanking will continue on Thursday with a House Financial Services Committee hearing. And that committee's crypto interest will continue next week with a February 11 hearing entitled "A Golden Age of Digital Assets: Charting a Path Forward."