During a speech on Friday, the Vice Chair of the Federal Deposit Insurance Corporation (FDIC), Travis Hill, who is also a potential Trump pick for Chair, acknowledged there had been some crypto debanking. It was part of his wide ranging analysis of potential future policy directions including changes to be made with respect to digital assets, DLT and blockchain.
“Closely related to the agencies’ recent approach to digital assets is the problem of ‘debanking’,” he said. “Over the past few years, there have been various accounts of individuals and businesses associated with the crypto industry losing access to bank accounts without explanation. This follows a long history of other types of customers experiencing the problem of debanking, including the politically disfavored business groups targeted by the original ‘Operation Choke Point,‘ individuals associated with certain religious or political groups, and many others.”
Coinbase submitted a freedom of information request to the FDIC on this topic, with the responses published last week. In most cases the letters showed a pattern of delaying or obstructing banks that planned to offer crypto services. A few examples related to engaging with DLT, including the USDF tokenized deposit consortium.
More generally on the topics of DLT and digital assets, Mr Hill noted there had been plans to publish various policy documents outlining the agency’s expectations. However, this direction was abandoned in 2022 in favor of requesting institutions to engage with the agency on a case by case basis.
“I have talked in the past about how damaging this approach has been, as it has stifled innovation and contributed to a public perception that the FDIC is closed for business if institutions are interested in anything related to blockchain or distributed ledger technology,” Mr Hill said.
Broader FDIC direction
For digital assets and beyond, he signaled a potential shift towards clarifying expectations upfront, rather than requiring time consuming engagement by institutions or establishing rules through enforcement actions.
Mr Hill would like to resurrect the FDiTech innovation lab, which was implemented during Trump’s first term and subsequently disbanded. Whether within the FDITech or elsewhere, there’s a need to hire staff with new tech skills.
Beyond new technology, he also explored banking supervision. Mr Hill noted the need to have greater balance between banking supervision process and the core financial risks faced by banks, which were overlooked with the collapse of Silicon Valley Bank.
