New GOP bill targets debanking of crypto firms

A new bill introduced by Senator Tim Scott, Chair of the US Senate Banking Committee, aims to end the practice of debanking, where banks terminate accounts deemed risky due to reputational concerns.

This move follows recent congressional hearings into "Operation Chokepoint 2.0," a controversial initiative that critics argue unfairly targets industries like cryptocurrency.

Debanking has been a contentious issue, affecting various sectors, including firearms, cannabis, and cryptocurrency.

Banks often justify the practice by citing reputational risks, which can lead to financial exclusion without clear justification.

Senator Scott's bill, the Financial Integrity and Regulation Management Act, seeks to eliminate reputational risk from regulatory oversight, preventing federal agencies from incorporating this concept into guidelines.

The bill has gained support from at least 11 Republican lawmakers and major banking groups like JPMorgan Chase.

Senator Cynthia Lummis, who leads the Senate Banking Subcommittee on Digital Assets, emphasised the need for a transparent regulatory framework that fosters innovation in digital assets rather than stifling it through government overreach.

The cryptocurrency industry has been particularly vocal about debanking, claiming that legitimate businesses have been unfairly targeted.

Marc Andreessen, co-founder of Andreessen Horowitz, noted that over 30 tech and crypto founders have been denied banking services, fueling concerns about systemic discrimination.

While there is bipartisan agreement that debanking should be addressed, the issue remains contentious.

Senator Elizabeth Warren stated that debanking based on beliefs or illegitimate reasons is wrong and should be stopped.

However, some argue that regulatory scrutiny is necessary to protect investors from volatile markets and fraudulent activities.