US Regulator Seeks End to Bank Deplatforming of 'Disfavored' Industries (Like Crypto)

Call it the CPR for Operation Choke Point.

AccessTimeIconNov 21, 2020 at 2:00 a.m. UTC
Updated May 9, 2023 at 3:13 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Call it the CPR after Operation Choke Point.

The U.S. Office of the Comptroller of the Currency, a national bank regulator led by former Coinbase counsel Brian Books, has proposed a rule that would forbid banks to blacklist legal industries – including, presumably, cryptocurrency firms. 

  • How NEAR Enables Multichain Access From One Account
    00:56
    How NEAR Enables Multichain Access From One Account
  • Why the NEAR foundation Chose Eigenlayer as a Security Partner
    00:54
    Why the NEAR foundation Chose Eigenlayer as a Security Partner
  • Judge Kaplan Had 'No Love' for Sam Bankman-Fried, Legal Expert Says
    07:08
    Judge Kaplan Had 'No Love' for Sam Bankman-Fried, Legal Expert Says
  • How Bitcoin and Ether's Options Contracts Combined Expiry Could Spike Volatility
    01:11
    How Bitcoin and Ether's Options Contracts Combined Expiry Could Spike Volatility
  • Under the proposed rule, banks could deny financial services to customers only on the basis of “quantitative, risk-based standards established in advance,” not in response to political pressures. 

    The proposalhttps://occ.gov/news-issuances/federal-register/2020/nr-occ-2020-156a.pdf, published Friday in the Federal Register, does not mention cryptocurrency. But it will likely come as welcome news to businesses in the space, which have long struggled to obtain or keep bank accounts in the U.S. Crypto firms have long relied on a handful of banks – Silvergate Bank, Signature Bank and Metropolitan Commercial Bank among them – for basic banking needs. 

    On the other hand, if banks in the world’s largest economy were forbidden to discriminate against legitimate businesses, then all else equal, it could, in theory, undermine the appeal of permissionless, censorship-resistant payment systems such as Bitcoin.  

    The OCC proposal specifically mentions Operation Choke Point, an Obama-era Justice Department initiative that was ostensibly meant to shut down only fraudulent businesses and payday lenders by pressuring banks to close their accounts. In practice, there appears to have been widespread collateral damage

    “Government agencies (but not the OCC) were revealed to have pressured banks to cut off access to financial services to disfavored (but not unlawful) sectors of the economy,” according to the OCC’s proposal. These included the firearm and coal industries. Operation Choke Point ended officially in late 2017, but financial intermediaries still receive pressure from politicians and the public to unbank industries or individuals deemed unsavory or problematic. 

    In its proposal, the regulator gave examples of banks being pressured by political boycotts to stop providing financial services to family planning organizations or shotgun and rifle makers. 

    “Neither the OCC nor banks are well-equipped to balance risks unrelated to financial exposures and the operations required to deliver financial services,” the regulator wrote. “For example, climate change is a real risk, but so is the risk of foreign wars caused in part by U.S. energy dependence and the risk of blackouts caused by energy shortages … balancing these risks is the purview of Congress and Federal energy and environmental regulators” — in other words, not financial regulators or institutions.

    The proposal is open for public comment through Jan. 4.

    This week, President Donald J. Trump nominated acting Comptroller Brooks to be the permanent head of the OCC for a five-year stint. Congress has yet to vote on the nomination and the projected president-elect, Joe Biden, may end up filling the post if Brooks isn’t confirmed by Jan. 20.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.