Jakub Sobkowicz
Associate Editor
Loyola University Chicago School of Law, JD 2027

On January 23, 2025, President Trump signed an executive order aimed at supporting the growth of digital assets and blockchain technologies across the American economy, mitigating risks associated with Central Bank Digital Currencies (CBDCs), and protecting fair and open access to banking services for all private-sector entities. This executive order was created following accusations from industry leaders in digital assets who claim that banking regulators at the Federal Deposit Insurance Corporation (FDIC) were encouraged by the Biden administration to instruct banks to deny banking services to digital asset companies, also known as debanking. To investigate these claims further, the United States Senate Committee on Banking, Housing, and Urban Affairs conducted a hearing on February 5, 2025 to hear directly from industry leaders about the depth and impact of the allegations.

One witness who testified at the committee hearing was Nathan McCauley, co-founder and CEO of Anchorage Digital Bank, who described the abrupt end to Anchorage’s banking relationship with an unnamed bank when their bank accounts were closed with no explanation or warning. McCauley’s company was fortunate enough to eventually find another bank that was willing to provide services, but the disruption had caused significant damage including a 20% workforce reduction within Anchorage, which equated to 70 employees. Additionally, Anchorage users are still unable to send wire transfers to third parties. McCauley shared his first-hand knowledge of the industry damages occurring beyond Anchorage, including four other digital asset companies being forced to shut down after being debanked, two employees who have been personally debanked potentially due to their connections to the industry, and many other digital asset leaders and companies who have been personally debanked as well. While it is clear that abrupt bank account closures are increasingly common in the digital asset industry, the Senate is continuing to investigate who is to blame – the regulators or the banks themselves.

The history of debanking in the United States

With the opening statement of the hearing, the committee chairman, Senator Tim Scott, shared the personal importance of debanking by recalling the denial of financial services that his grandfather faced in the Jim Crow South and the discrimination his mother faced through the redlining of home loans in the 1940s. These historical examples of debanking demonstrate that debanking is an intentional and systemic denial of financial services to a targeted group under the justification that the group poses a high risk to the banks. More recently, in 2013, the Department of Justice (DOJ), under the Obama administration, used regulators to carry out “Operation Choke Point” to debank specific disfavored industries such as gun manufacturers and pay day loan companies. These debanking operations were enforced through the regulatory authority of the DOJ, FDIC, or other banking regulators to threaten action against banks who provide financial services to the targeted groups. The accusations being made by the digital assets industry claim that this same 2013 scheme is being revived against them through the FDIC which is why Senator Scott refers to this current debanking claim as “Operation Choke Point 2.0”.

Debanking as a bipartisan concern with partisan theories

Following the opening statement by Senator Scott, Senator Elizabeth Warren provided her perspective on the issue by concurring that debanking is a serious issue but pinning the cause of it on the banks themselves. Senator Warren pointed to nearly 12,000 consumer complaints logged by the Consumer Financial Protection Bureau (CFPB) within the past 3 years in which consumers were unable to open bank accounts or had their accounts closed. She explained that these complaints shared common qualities in that the consumers often received no warning, no explanation, and no chance to dispute or appeal the decisions of the banks. Rather than looking at regulators as the tools in a debanking scheme, Senator Warren suggests that the committee and Trump administration should be looking at shortcuts in risk assessment strategies being taken by banks.

Evidence indicating the likely existence of Operation Choke Point 2.0

Shortly before the February 5th hearing, the FDIC released 175 documents relating to its oversight of digital asset activities by numerous banks. Specifically, the FDIC sent 25 letters to banks instructing the banks to pause pursuing activities relating to digital assets. The acting chairman of the FDIC, Travis Hill, released a statement where he described that all of the requests from banks related to digital assets were “almost universally met with resistance” and that the letters “and other actions sent the message to banks that it would be extraordinarily difficult – if not impossible – to move forward” with digital asset activities. Therefore, “as a result, the vast majority of banks simply stopped trying”.

Additionally, Chairman of the Federal Reserve, Jerome Powell, was asked about debanking by the Senate committee during a semiannual monetary policy report to congress on February 11, 2025. In his testimony, Powell noted that he is also concerned about the quantity of reports of debanking within the industry and is committed to the Federal Reserve taking a closer look into the issue. While he did not provide a definitive assessment of the cause, he agreed that one possible theory aligned with Senator Warren’s beliefs that banks are increasingly risk averse about money-laundering standards and are not interested in customers or financial products that stretch compliance requirements.

The future of digital asset banking

While the Senate committee intends to continue its investigation with additional hearings on the digital asset debanking topic, Congress is beginning to act to close the regulatory gaps in the digital asset industry with the introduction of the Guiding and Establishing National Innovation for U.S. Stablecoins Act on February 5, 2025. The act is intended to establish clear rules and procedures surrounding licensing of stablecoin issuers and build a regulatory framework for the stablecoin market. Although stablecoins are not inclusive of the entire digital asset industry, this act represents a step in the right direction and the legislature’s intent to focus on developing a clear framework for the emerging technology-driven financial markets. Although the growing concerns about debanking in the digital asset industry were the headlines that brought attention to the regulatory gaps in financial technology, it is imperative to the stability of the economy that Congress is successful in developing bipartisan standards that clearly and fairly establish regulatory frameworks for all aspects of financial technology – regardless of who is to blame for the debanking trends.