Senators warn banking authorities about crypto prejudice

Four Republican United States senators, led by Bill Hagerty, have sent a letter to the leaders of federal financial regulatory agencies in which they question the ideological basis behind recent regulatory actions regarding Cryptocurrencies.

They linked the policies of the regulators to Operation Choke Point of the Obama administration.

The senators addressed Jerome Powell, chairman of the Federal Reserve Board; Marty Gruenberg, chairman of the Federal Deposit Insurance Corporation; and Michael Hsu, acting comptroller of the Office of the Comptroller of the Currency.

The 9 March letter stated that their agencies, together with the White House, have published remarks on heightened oversight that have resulted in negative repercussions for the cryptocurrency industry, such as the closure of crypto businesses’ bank accounts.

The senators were referring to the joint statement issued by these authorities on January 3 that stated, “Issuing or holding as major crypto-assets […] is likely inconsistent with safe and sound banking procedures.”

In addition, they cited a Fed policy statement from February that made specific reference to cryptocurrencies and stated that “legal permissibility is a necessary but not sufficient condition” for banking activity, as well as a January “road map” from the Biden administration that urged agencies to “intensify enforcement.”

Senators wrote: “This concerted activity is eerily reminiscent of Operation Choke Point.”

In this operation, “federal officials exerted pressure on financial institutions to shut off financial services to certain licensed, lawfully functioning companies” because certain federal regulators and policymakers disfavored these industries.

They also stated:

“We are especially worried that overreaching behavior by the banking regulators will inevitably bleed into other legal industries.”

The senators asked the regulators several questions. They questioned how their additional oversight will benefit consumers, if banks may provide services to crypto companies under the amended guidelines, and if the authorities plan to provide similar recommendations for other industries.

With their letter, the senators join a discussion within the crypto community on the voluntary liquidation of Silvergate Bank.

With the FDIC’s decision to close Silicon Valley Bank, this discussion may intensify.

The letter was co-written by Senators Mike Crapo, Thom Tillis, and Steve Daines.

In October, Hagerty proposed the Digital Trading Clarity Act to the Senate.

This measure would give bitcoin exchanges protection from certain Securities and Exchange Commission (SEC) enforcement proceedings.