FDIC Evaluates New Regulations for Cryptocurrency Businesses
The board of the Federal Deposit Insurance Corporation (FDIC) is preparing to evaluate new regulations that could significantly influence the banking landscape for cryptocurrency businesses, particularly in light of ongoing claims of debanking practices targeting these firms. In a notification issued on Thursday, the FDIC announced plans to consider a notice of proposed rulemaking aiming to restrict regulators from invoking the concept of “reputation risk” as a basis for limiting banking activities related to cryptocurrencies.
Concerns Over Reputation Risk
Although the agenda did not specifically highlight the issue of debanking concerning digital assets, Travis Hill, the acting chair of the FDIC, has previously expressed concerns that regulators have improperly utilized “reputation risk” to steer banks away from engaging with crypto-related operations, including facilitating client transactions with cryptocurrency exchanges.
Political Context and Historical Accusations
This discussion comes in the wake of comments from former President Donald Trump, who in an August executive order emphasized the need for freedom in banking. He warned that allowing regulators to assess reputation risk could pave the way for biased or unlawful debanking practices.
Notably, Trump’s executive order did not directly reference cryptocurrencies. Prior to Trump’s presidency and his subsequent executive order, members of the cryptocurrency community had accused regulatory authorities of systematically blocking access to U.S. banking services, allegedly as part of a concerted strategy against digital asset firms.
A series of court documents released through a Freedom of Information Act request indicated that the FDIC had instructed various financial institutions to cease all operations linked to crypto assets in 2022. This initiative has been referred to by some as “Operation Chokepoint 2.0” and has become a significant topic of discussion for Trump and various Republican candidates ahead of the 2024 elections.
FDIC’s Future Plans
After Trump secured the presidency and appointed Hill to lead the FDIC, Hill announced plans for the agency to reassess its approach to the supervision of crypto-related activities. Cointelegraph did seek feedback from the FDIC for this report but had not received any information by the time of publication.
Government Shutdown Impact
In related news, on Tuesday at midnight, the U.S. government experienced a shutdown after lawmakers were unable to pass a funding extension bill before the October 1 deadline. While the shutdown has led to considerable operational restrictions at major regulatory bodies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), the FDIC has stated it will continue functioning “open and operational” despite the political impasse.
