Concerns Over Potential De-banking Of Digital Asset Firms Are On The Rise

Could digital asset firms be facing a de-banking crisis? Potential coordinated efforts to de-bank the digital asset ecosystem are being investigated by CryptoUK, the Blockchain Association (BA), and now three Republican members of the U.S. House of Representatives Financial Services Committee.

On March 21, 2023, CryptoUK wrote letters to the Financial Conduct Authority and the Payment Systems Regulator over concerns about the increasing number of new blanket bans and restrictions on transfers from United Kingdom (U.K.) banks to crypto asset platforms as well as seeking potential solutions. CryptoUK is an independent industry body that works directly with policymakers and market players to identify and promote use cases for digital and crypto assets.

CryptoUK is concerned that other banks and Payment Services Providers would take similar action. CryptoUK said that these actions had the potential to undermine the Government’s ambition to become a crypto asset hub.

On March 16, 2023, the Blockchain Association (BA) submitted a request for information from the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System (Fed), and the Office of the Comptroller of the Currency (OCC) over potential de-banking of crypto firms in the United States.

The Blockchain Association is a collective voice of industry players promoting blockchain technology. The BA also requested impacted crypto industry participants to submit any de-banking allegations for further investigation.

On April 14, 2023, the Blockchain Association submitted additional information requests to Investigate the de-banking of Crypto Firms to the Federal Housing Finance Agency (FHFA) and New York Department of Financial Services (NYDFS).

On April 25, 2023, three Republican members of the United States House of Representatives Financial Services Committee sent letters to the heads of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, seeking information on possible coordinated efforts taken against digital asset firms.

The information requested related to compliance by the Office of the Comptroller of the Currency on the Interpretive Letter #1179 issued in November 2021 on whether it was permissible for national banks and Federal savings associations to engage in certain crypto-related activities.

The US lawmakers also requested information on the compliance to a January 2023 joint statement on crypto-asset risks to Banking Organizations issued by the Fed, the FDIC, and the OCC that banking organizations need to be aware of.

The debate on the coexistence of digital asset firms and banking organizations appears far from over.