Trump Executive Order Tackles Alleged Crypto and Conservative Debanking Practices

President Donald Trump is poised to sign an executive order targeting alleged discriminatory banking practices against cryptocurrency firms and conservative groups, aiming to address what critics have labeled “Operation Chokepoint 2.0”[1]. The directive instructs regulators to investigate potential violations of credit laws, antitrust statutes, and consumer protection regulations in cases where banks terminate customer relationships[1]. Financial institutions found to be in violation could face financial penalties and regulatory enforcement actions[1].

This executive action is a direct response to claims that the Biden administration engaged in a systemic effort to cut off banking services to cryptocurrency companies and politically conservative clients, particularly after the collapse of the FTX cryptocurrency exchange in late 2022[1]. Coinbase’s chief legal officer, Paul Grewal, testified in February that the FDIC applied intense scrutiny to banks dealing with crypto and stablecoins, leading to the discontinuation of such services[1]. A Coinbase-backed FOIA lawsuit further revealed that the FDIC had asked certain banks to pause crypto-related activities, lending credibility to the claims of a coordinated debanking strategy[1].

The term “Operation Chokepoint 2.0” was coined in February 2023 by crypto venture capitalist Nic Carter, referencing the Justice Department’s earlier initiative targeting payday lenders and banks in the 2010s[1]. The FDIC has been compelled to release documents showing efforts to discourage banks from serving crypto firms, with Coinbase continuing legal efforts to obtain further evidence of the alleged practices[1].

Legal challenges to the executive order have already emerged. Alex Chandra, a partner at Indonesia-based law firm IGNOS Law Alliance, noted that while executive orders can enforce existing laws, they cannot create new protections. Political affiliation is not a protected class under current federal anti-discrimination law, raising questions about the legal foundation of the directive[1]. The banking industry generally refers to the practice as “derisking,” and institutions are permitted broad discretion in closing accounts where legal, financial, or reputational risks are perceived[1].

In response, banks have revised policies to explicitly prohibit political discrimination and have engaged with Republican state officials to demonstrate compliance[1]. The Federal Reserve announced in June that it would stop examining for reputational risk, aligning with similar moves by the Office of the Comptroller of the Currency and the FDIC[1].

If finalized, the order will require federal agencies to dismantle internal policies that facilitated debanking, refer violations to the Justice Department, and review how the Federal Reserve grants access to critical banking infrastructure for crypto firms[1]. It also includes provisions to investigate banks for allegedly denying services to political conservatives and directs the Small Business Administration to assess banking practices related to small business loans[1].

Trump has previously criticized Biden-era regulators, stating that “the regulators control the banks,” and that federal agencies are the ultimate decision-makers in banking denials[1]. The draft order does not name specific banks but highlights cases such as Bank of America’s decision to close an account for a Christian organization in Uganda, citing its policy against serving small overseas businesses[1].

Source: [1] Trump Administration Targets “Operation Chokepoint 2.0” with New Executive Order (https://blockonomi.com/trump-administration-targets-operation-chokepoint-2-0-with-new-executive-order/)