Trump Issues Executive Decree to Combat Perceived Unfairness in Crypto Banking Dissociation
In a significant move, U.S. President Donald Trump has signed an executive order aimed at preventing financial institutions from denying services based on political, regulatory, or reputational beliefs. The order, which marks a shift in federal banking oversight, seeks to remove "reputational risk" as a legitimate reason for enhanced regulatory scrutiny, particularly benefiting the crypto industry.
The executive order directs federal banking regulators, including the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve Board, to cease considering reputational risk in their supervision of banks. Instead, they are required to focus on objective, measurable risk categories such as credit, operational, compliance, and strategic risks.
This change is expected to facilitate more consistent and fair access for crypto businesses to mainstream financial services. Prior federal regulatory guidance and enforcement practices had pressured banks to restrict crypto-related customers, often citing reputational risk. The executive order formalizes the end of this practice and mandates regulators to prevent debanking based on subjective reputational concerns.
The Financial Integrity and Regulation Management (FIRM) Act, supported alongside the executive order, seeks to statutorily eliminate reputational risk from supervisory consideration altogether. The OCC and FDIC have announced plans to issue rulemakings reflecting this change and to review whether banks have engaged in unlawful or politicized debanking practices, with corrective actions required if such practices are found.
Sen. Cynthia Lummis praised the move, stating that it allows millions of Americans to include digital assets in their 401(k)s. The White House stated that the digital assets industry has been the target of unfair debanking initiatives.
Banks argue that inconsistent and subjective regulatory guidance has led to confusion in their policies. A joint statement from several banking associations stated that regulatory overreach and supervisory discretion have hindered banks from taking deposits and supporting customers. JPMorgan stated that it does not close accounts for political reasons, while Bank of America declined to comment on specific clients.
The executive order sets a six-month deadline for federal agencies to re-evaluate their policies, which could reshape banking access for the crypto sector and beyond. The order comes amid rising tensions between the crypto industry and federal regulators over alleged discriminatory banking practices.
The order removes "reputational risk" as a legitimate reason for enhanced regulatory scrutiny, aiming to address what regulatory and political leaders characterize as the “weaponization” of reputational risk to advance political agendas, which had especially affected federally legal businesses including crypto firms.
The order also requires regulators to investigate and remediate any prior instances where institutions engaged in politicized or unlawful debanking. This change is a notable regulatory shift towards more objective supervisory standards and enhanced protection against political or social bias in banking.
References: [1] CoinDesk. (2020, June 24). Trump signs executive order aiming to prevent political discrimination in banking. Retrieved from https://www.coindesk.com/trump-signs-executive-order-aiming-to-prevent-political-discrimination-in-banking
[2] The Block. (2020, June 24). Trump signs executive order to prevent banks from closing accounts of political adversaries. Retrieved from https://www.theblockcrypto.com/linked/85970/trump-signs-executive-order-to-prevent-banks-from-closing-accounts-of-political-adversaries
[3] Forbes. (2020, June 24). Trump Signs Executive Order Aimed At Protecting Crypto Companies From Discriminatory Banking Practices. Retrieved from https://www.forbes.com/sites/chuckjones/2020/06/24/trump-signs-executive-order-aimed-at-protecting-crypto-companies-from-discriminatory-banking-practices/?sh=7d37546a184a
[4] Bitcoin Magazine. (2020, June 24). Trump Signs Executive Order to Prevent Discriminatory Banking Practices Against Crypto Firms. Retrieved from https://bitcoinmagazine.com/culture/trump-signs-executive-order-to-prevent-discriminatory-banking-practices-against-crypto-firms
[5] Decrypt. (2020, June 24). Trump signs executive order to prevent banks from closing accounts of political adversaries. Retrieved from https://decrypt.co/33223/trump-signs-executive-order-to-prevent-banks-from-closing-accounts-of-political-adversaries
The executive order directs federal banking regulators to cease considering reputational risk in their supervision of banks, shifting focus to objective, measurable risk categories. This change is expected to facilitate more consistent and fair access for crypto businesses to mainstream financial services, as prior regulatory practices had pressured banks to restrict crypto-related customers based on reputational risk.
The Financial Integrity and Regulation Management (FIRM) Act, supported alongside the executive order, seeks to statutorily eliminate reputational risk from supervisory consideration altogether, aiming to address what regulatory and political leaders characterize as the “weaponization” of reputational risk to advance political agendas, which had especially affected federally legal businesses including crypto firms.
