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A US House Of Representatives committee has announced it is investigating cases of organisations, including significant crypto players such as Coinbase and Kraken, being debanked based on their political views.
The House Committee on Oversight and Government Reform, which is led by James Comer, a Republican, has opened an investigation into allegations that financial institutions are debanking individuals and businesses based on their political affiliations or involvement in industries perceived unfavourably by the Biden administration.
This comes at the same time as an announcement that the Senate Banking Committee will convene a hearing on debanking on February 5, 2025.
“Debanking is un-American — every legal business deserves to be treated the same regardless of their political beliefs,” said Senate chair Tim Scott.
In recent times, key crypto advocates such as Caitlin Long of Custodia Bank have accused the US government of conducting "Operation Chokepoint 2.0", and Republican Scott referenced this in his announcement.
“Under Operation Chokepoint 2.0, Biden regulators abused their power and forced financial institutions to cut off services to digital asset firms, political figures, and conservative-aligned businesses and individuals. This is unacceptable,” he said.
The inquiry will build upon a 2014 Oversight Committee report on Operation Chokepoint, which detailed efforts by the Obama administration to pressure banks into cutting ties with certain legal industries.
The House inquiry
The House of Representatives inquiry follows claims from prominent tech leaders and public figures that they have lost access to banking services under questionable circumstances.
“The Committee seeks to understand the financial institutions and regulators involved, the reasons tech founders were given as to why they were debanked, and how this overreach affected business operations,” the committee said in a letter addressed to key tech founders believed to have experienced debanking.
During a recent appearance on the podcast "The Joe Rogan Experience", tech investor Marc Andreessen revealed that 30 tech founders were debanked over the past four years.
He described the issue as a targeting of disfavoured start-ups and individuals with opposing political views.
His fellow tech leaders Brian Armstrong of Coinbase and Dave Ripley of Kraken have shared similar experiences of sudden account closures and restricted access to financial services.
Comer has addressed his letter to the crypto CEOs, as well as David Marcus, CEO of Lightspark; Kristin Smith of the Blockchain Association; and Hayden Adams of Uniswap Labs.
In a statement released in light of the announcement, Smith welcomed the development.
“We are grateful to assist in the thorough investigation of this pernicious practice,” she said.
“Lawful crypto organizations and individuals need bank accounts to pay rent, pay taxes, and pay employees — denying them these basic financial services is wrong and should never happen in the United States of America.”
“We’re eager to get to the bottom of this and end this unlawful practice once and for all.”
A Trump problem
The reported debanking controversy also extends beyond the tech sector.
For example, in her memoir, First Lady Melania Trump disclosed that her bank account was terminated, and that her son, Barron Trump, was denied the opportunity to open a new account.
The committee is examining whether such incidents represent a broader pattern of politically motivated discrimination by financial institutions.
“These examples are startling, and the Committee is investigating whether this debanking practice originates from the financial institutions themselves or from either implicit or explicit pressure from government regulators,” said Comer.
Aligning with the CFPB?
The Republican Party and the Consumer Financial Protection Bureau (CFPB), a regulator established in the Obama era and pushed for by progressives such as Senator Elizabeth Warren, are hardly best of friends.
However, this intervention by both Houses and a recent rule issued by the CFPB do align.
Whereas Congress appears to be going after high-profile cases that have been heavily reported in the media, the CFPB has been more focused on cases such as PayPal’s controversial terms penalising users for expressing certain views or criticisms.
Both efforts emphasise how much of an issue debanking is in Trump’s Washington, with the CFPB focused on banning contract clauses that penalise consumers for opinions or reviews, and the Oversight Committee investigating whether debanking practices reflect political discrimination.
In terms of remedies, the Oversight Committee seeks to identify potential reforms to prevent ideological discrimination and debanking.
Following witness hearings, which could end up featuring the CFPB, it will make recommendations as to what changes should be made.
The CFPB’s rule, meanwhile, would create enforceable protections against unfair contract terms and empower state attorneys general to hold financial institutions accountable under federal law.
A financial penalty from the CFPB, combined with a takedown by US politicians, does not bode well for US banks and is likely to be concerning for them.
Ultimately, both initiatives share the goal of safeguarding individual rights within the financial system, in a bid to restrict current banking practices.
