FDIC Interim Chair Criticizes Crypto Debanking Policies
By: Eva Baxter
The interim Chair of the Federal Deposit Insurance Corporation (FDIC), Travis Hill, has taken a definitive stance against what is being perceived as "Operation Chokepoint 2.0," an initiative purportedly aimed at stifling growth within the US crypto industry. Addressing the issue during a recent speech in St. Louis, Hill expressed concern over the debanking of cryptocurrency firms, likening it to past efforts against politically sensitive and disfavored industries. He emphasized that such practices do not align with the FDIC's mission to reduce the number of unbanked citizens and declared them "unacceptable."
The context of Hill's remarks highlights a broader debate around regulatory hurdles faced by the cryptocurrency sector in the United States. The alleged operation aims to cut off banking services to crypto businesses, effectively choking their ability to operate. Hill's recognition of these actions and his commitment to ending them marks what some, like Coin Metrics co-founder Nic Carter, see as a significant paradigm shift within the FDIC's approach to digital assets.
Hill also criticized the FDIC's cautious stance toward crypto, stating that the issuance of "pause" letters to multiple banks asking them to halt crypto-related activities, contributed to a hostile perception of the agency towards blockchain innovation. Such actions have been seen as hindering technological advancements and impediments to business operations. He called for a reset of the FDIC's digital asset strategy, urging for transparent guidance on permissible activities while ensuring they adhere to safety standards.
Furthermore, Hill addressed the broad implications of regulatory oversight over crypto activities like staking and lending. He noted that the stringent measures under current systems, such as the Bank Secrecy Act (BSA), often lead banks to prematurely close accounts to mitigate compliance risks. This, he argued, inadvertently harms law-abiding customers and stifles innovation. Hill advocates for revisiting the BSA to prevent such outcomes and to facilitate a balance between regulatory compliance and fostering innovation.
The interim chair is optimistic about an upcoming shift in the FDIC's approach, particularly with the agency's leadership transition on the horizon. Proposals are being put forward to modernize FDIC policies to not only keep pace with financial innovations but also reinforce safety and soundness principles. Hill envisions a revitalization of initiatives like the agency's innovation lab, FDiTech, to promote collaboration with the fintech sector and optimize regulatory practices that drive financial inclusion and technological progress.
