Congressional report on crypto regulation accuses Biden administration of choking industry with unclear rules

A new congressional report alleges that recent crypto regulation in the United States has created a hostile environment for digital asset businesses and their banking partners.

Congressional report targets Biden administration over digital asset policy

A House report led by Representative French Hill accuses the Biden administration of stifling the U.S. cryptocurrency industry through regulatory pressure and unclear rules. The document argues that actions by federal agencies echo Operation Choke Point, a controversial initiative during the Obama era that targeted legally operating businesses such as payday lenders and ATM operators.

According to the report, this modern parallel involves informal pressure on financial institutions and a lack of transparent standards for dealing with digital asset companies. Moreover, the authors say this approach has encouraged risk-averse behavior among banks, even when crypto businesses sought to comply with existing laws.

Committee staff stress that federal officials did not always issue formal bans. However, they argue that persistent warnings and supervisory pressure were enough to change banks’ risk calculations and led to indirect restrictions on the sector.

Lack of clear guidance and the debanking of crypto firms

Hill’s report states that uncertainty around cryptocurrency rules has caused significant disruptions in banking services for digital asset firms. It claims that over 30 crypto companies and individuals lost banking relationships due to unclear guidelines and informal signals from regulators, rather than explicit legal prohibitions.

Banks, unsure how to interpret supervisory expectations, reportedly limited their exposure to digital asset businesses to avoid potential regulatory scrutiny. Moreover, committee staff said institutions were often cautioned about the risks of working with such clients, which in turn reinforced a conservative stance toward the sector.

This caution, the report argues, produced a wider reluctance to engage with legally operating crypto businesses. That said, the document acknowledges that most of these decisions were framed by banks as risk management choices rather than overt directives from Washington.

Bryan Steil, Chairman of the Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee, endorsed the report’s findings. He underscored what he views as the negative impact of supervisory actions on innovation and employment in the crypto ecosystem, emphasizing that crypto banking access issues emerged from regulatory behavior more than from the legal status of the firms involved.

SEC and Federal Reserve under scrutiny for enforcement-first strategy

The congressional report also scrutinizes the role of the Securities and Exchange Commission and the Federal Reserve. It argues that these agencies have contributed to a climate of uncertainty by relying heavily on enforcement actions, rather than offering clear guidance or formal rulemaking, to shape digital asset policy.

According to the document, the SEC’s approach has left businesses unsure which rules apply and how existing securities laws map onto specific token structures. Moreover, critics highlighted that this enforcement-first stance has discouraged some financial institutions from engaging with digital assets, limiting broader institutional adoption.

Banking regulators, including the Federal Reserve, are said to have taken steps that made it more difficult for banks to serve crypto firms. However, these measures were often framed as safety-and-soundness decisions, which makes it harder for Congress to assess where supervisory prudence ends and undue pressure begins.

The report contends that this environment has hindered institutional participation in the digital asset market. In that context, lawmakers are increasingly focused on addressing sec regulatory uncertainty and providing a more predictable policy framework for the industry.

Legislative responses and evolving policy landscape

With the regulatory landscape still in flux, Congress has accelerated work on new digital asset rules. Lawmakers have recently enacted the first national stablecoin law, marking a significant step toward a comprehensive framework for dollar-pegged tokens and their issuers in the U.S. market.

In addition, a large market structure bill is now lined up for Senate consideration. Moreover, this proposed legislation aims to clarify the respective roles of market regulators, define when tokens are treated as securities or commodities, and set consistent standards for trading platforms.

The report notes that these debates are taking place against a backdrop of rising demand for policy clarity from investors, exchanges, and traditional financial institutions. However, it also stresses that any new framework must balance innovation, consumer protection, and financial stability if it is to gain lasting support.

Transition from Trump-era guidance to Biden-era supervision

The document briefly compares approaches to digital assets under the Trump and Biden administrations. It states that several key supervisory documents issued in the previous administration have been withdrawn during the current term, which has reshaped expectations around how banks may interact with crypto businesses.

According to the report, this shift could eventually reduce the risk of further debanking in the digital asset sector by eliminating some of the most controversial guidance. Moreover, it suggests that a reset in supervisory messaging might open space for more transparent rulemaking and clearer risk parameters for banks.

Nonetheless, the authors argue that persistent uncertainty keeps many institutions on the sidelines. That said, they also acknowledge that the policy debate is moving quickly as Congress advances a major crypto regulation bill and explores further measures to define the future of market oversight.

Broader implications for the U.S. crypto market

The House report links agency actions and supervisory pressure to the wider discussion on crypto oversight in the United States. It emphasizes that industry participants see the current environment as a test of whether the country will remain a leading hub for digital asset innovation or cede ground to rival jurisdictions with clearer frameworks.

In one of its key conclusions, the report states that the current pattern of enforcement, informal pressure, and shifting guidance has blurred the line between legitimate risk management and an effective campaign against certain lawful activities. Moreover, it warns that inconsistent messaging could undermine trust in the regulatory process itself.

The authors call for more transparent standards, formalized through legislation and open rulemaking, rather than through ad hoc supervisory decisions. In this context, they highlight that any durable solution must integrate banking oversight, securities law, and commodities regulation into a coherent approach to crypto regulation.

In summary, the congressional report portrays a regulatory climate shaped by ambiguity, supervisory pressure, and evolving political priorities, while Congress races to craft a clearer statutory framework for digital assets and their integration into the U.S. financial system.