Trump Administration Considers Order to Shield Crypto Firms from Banking Discrimination

The Trump administration is contemplating an executive order designed to safeguard cryptocurrency firms from discriminatory banking practices. This potential action is a response to what some critics have labeled "Operation Chokepoint 2.0," a perceived effort by regulatory bodies to restrict banking services to certain industries, including cryptocurrency.

If issued, the executive order would represent a notable shift in the administration's approach to cryptocurrency regulation. It would indicate a more supportive stance towards the growing digital asset industry, which has frequently encountered obstacles in accessing traditional banking services due to regulatory scrutiny and risk aversion from financial institutions.

This development occurs as the cryptocurrency industry seeks greater legitimacy and integration into the mainstream financial system. The potential executive order could provide a significant boost to crypto firms, enabling them to operate more freely and access essential banking services without the fear of discrimination.

The move also underscores the ongoing debate surrounding cryptocurrency regulation. While some advocate for stricter oversight to prevent illicit activities, others push for a more permissive environment to encourage innovation and economic growth. The Trump administration's consideration of this executive order suggests a preference for the latter, acknowledging the potential benefits of a thriving cryptocurrency ecosystem.

However, the details of the executive order and its potential impact on the industry remain unclear. It is uncertain how the order would be implemented and what measures would be taken to ensure compliance. Additionally, the reaction from regulatory bodies and financial institutions to such an order is yet to be seen, as they may have differing views on the appropriate level of regulation for the cryptocurrency industry.

At least 30 technology and cryptocurrency founders were reportedly denied access to banking services during the Biden administration. Representatives from major US banks have met with state officials to defend against allegations that they refuse to serve certain industries, including the fun manufacturing and fossil-fuel extraction sectors.

In February, a prominent senator called on the Trump administration to take action against the country’s biggest banks for denying services based on political or industry considerations. The senator emphasized that people should not be arbitrarily denied access to their banks, locked out of their accounts, or stripped of their banking privileges.

The US banking system faced challenges following the sudden collapse of three crypto-friendly banks in March 2023. The collapse of these banks was seen by some as a coordinated effort to unbank the crypto industry, highlighting the ongoing concerns within the sector.

Despite a more favorable crypto regulatory regime under the Trump administration, the industry’s debanking concerns may persist until 2026. The founder and CEO of Custodia Bank noted that the debanking efforts may continue until a new Fed governor is appointed in January. She also highlighted the potential for a significant fight over the regulation of cryptocurrencies, as different regulatory bodies may have differing views on the appropriate level of oversight.

Custodia Bank, which was repeatedly targeted by US debanking efforts, incurred significant costs and delays due to these actions. The founder and CEO of Custodia Bank emphasized the need for a more supportive regulatory environment to foster the growth of the cryptocurrency industry.

Overall, the Trump administration's consideration of an executive order to protect crypto firms from banking discrimination represents a significant development in the ongoing debate surrounding cryptocurrency regulation. It underscores the administration's recognition of the industry's potential and its willingness to take steps to support its growth, while also raising questions about the future of cryptocurrency regulation in the United States.