White House Proposal Could Penalize Banks for Terminating Crypto and Conservative Clients

The White House is reportedly preparing an executive order that could penalize banks for terminating business relationships with customers based on political or ideological grounds, addressing concerns over what conservative groups and crypto firms describe as financial discrimination [1]. The draft directive, obtained by The Wall Street Journal, mandates that bank regulators investigate whether institutions have violated laws such as the Equal Credit Opportunity Act, antitrust statutes, or consumer protection rules. Banks found in violation could be subject to fines, consent decrees, or other regulatory actions [1].

While the order does not explicitly name any financial institutions, it references cases that have sparked political debate, including an accusation from 2023 that Bank of America closed the account of a Christian charity in Uganda. The bank explained the closure was due to its policy of not serving small businesses based overseas [1]. The draft also touches on the role some banks played in federal investigations related to the January 6 Capitol riots, urging regulators to eliminate internal policies that may lead to the exclusion of customers based on reputational or ideological concerns [1].

The issue of “de-banking” has been a persistent concern for conservative groups, who argue their accounts and donations are often restricted or terminated without clear justification. Similarly, crypto firms have raised alarms over what they perceive as informal pressure from regulators that has prompted banks to sever ties with blockchain startups, especially following the collapse of crypto-friendly institutions like Silvergate and Signature Bank [1]. Banks, however, have defended these decisions by emphasizing compliance with anti-money-laundering rules and the heightened regulatory scrutiny surrounding digital assets. They have also pointed to existing frameworks that make onboarding crypto clients particularly challenging, requiring more rigorous know-your-customer and transaction monitoring procedures [1].

The proposed directive adds new pressure to the banking sector, directing the Small Business Administration to review how banks manage loan guarantees, a critical support mechanism for crypto startups and conservative nonprofits. During Donald Trump’s administration, regulators shifted policy by ceasing to evaluate banks based on the reputational risks of their customers—a practice banks previously used to avoid certain clients [1]. The draft also grants regulators authority to refer specific cases to the Department of Justice. In April, the Justice Department formed a task force in Virginia to investigate claims that banks denied services or credit based on impermissible factors [1].

The proposed executive order signals a broader federal effort to address the increasing politicization of financial services. If finalized, it would mark a significant turning point in the ongoing debate over free speech, financial access, and the role of banks in a politically divided landscape [1].

Source: [1] Banks at Risk of Fines for Crypto Client Closures in White House Executive Order (https://cryptonews.com/news/banks-at-risk-fines-crypto-client-closures-white-house-executive-order/)