The majority of debanking cases in the US are a result of government pressure, rather than individual banks’ policies, according to a new report from the American think tank the Cato Institute.
Cato Institute analyst Nicholas Anthony explained in a report on Thursday that debanking could take several forms: religious or political, the idea that a financial institution closes accounts solely due to political or religious belief or affiliation; operational, when a bank chooses to close a customer’s account as it’s no longer in the bank’s interest; or government, when a government pressures a financial institution to close a customer’s account.
“While media and political narratives often attribute these closures to political or religious discrimination, this study finds that the majority of debanking cases stem from governmental pressure,” he said.
Cato Institute analyst Nicholas Anthony said there are generally four types of debanking. Source: Cato InstituteCrypto firms have been facing account closures and denials of banking services for years, and many in the industry have speculated these actions are part of a policy-driven effort to suppress the digital assets sector, particularly by the Biden administration.
Two forms of government debanking
Anthony said government debanking can take two forms: direct, when it uses a letter or court order to order an account closure, or indirect, when lawmakers use regulations and legislation to force an account closure.
He cites the Federal Deposit Insurance Corporation sending letters to financial institutions ordering them to halt crypto-related activity as an example of direct action.
Source: Cato Institute“Furthermore, the agency failed to provide a timeline or follow up with those financial institutions. So, in practice, these letters were effectively termination orders,” Anthony added.
In December, JPMorgan CEO Jamie Dimon denied debanking customers based on their religious or political affiliation during an interview with Fox News. He also claimed both sides of politics in the US, Democrats and Republicans, were equal offenders when it came to leaning on banks to debank people.
It followed Jack Mallers, the CEO of the Bitcoin Lightning Network payments company Strike, accusing JPMorgan of closing his personal accounts without explanation in November, and Houston Morgan, the head of marketing at non-custodial crypto trading platform ShapeShift, who shared a similar story in the same month.
Congress has the power to end debanking
US President Donald Trump’s administration has addressed this alleged debanking through executive orders on debanking, while appointing agencies like the Securities and Exchange Commission with more pro-crypto leaders.
Related: Crypto debanking is ‘still occurring’ as banks stick to Chokepoint policies
However, Anthony argues that Congress needs to take more action by reforming the Bank Secrecy Act, repealing confidentiality laws, and permanently ending reputational risk regulation.
“Doing so would reduce the incentives to debank, expose how widespread debanking has become, and cut out the tools that the government has used to pressure banks and other financial institutions,” he said.
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Source: https://cointelegraph.com/news/cato-institute-government-pressure-debanking-report?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
