US senators write to banking regulators about potential crypto discrimination

Four United States Republican senators lead by Bill Hagerty have written a letter to the heads of federal banking regulatory agencies questioning the ideological motivation behind recent regulatory moves in regard to cryptocurrency. They compared the regulators’ policies to the Obama administration’s Operation Choke Point.

The senators addressed Federal Reserve Board chair Jerome Powell, Federal Deposit Insurance Corporation (FDIC) chair Marty Gruenberg, and Office of the Comptroller of the Currency (OCC) acting comptroller Michael Hsu. The March 9 letter said that their agencies, along with the White House, have issued statements on heightened supervision that have resulted in unfortunate consequences for the cryptocurrency sector, such as the closing of crypto firms’ bank accounts.

The senators were referring to the joint statement released by those agencies on January 3 that said in part, “Issuing or holding as principal crypto-assets […] is highly likely to be inconsistent with safe and sound banking practices.” In addition, they pointed to a February Fed policy statement that said, making specific reference to crypto, that “legal permissibility is a necessary, but not sufficient, condition” for banking activity, and the Biden administration’s January “road map” that called for agencies to “ramp up enforcement.”

“This coordinated behavior seems disturbingly reminiscent of Operation Choke Point,” the senators wrote. In that operation “federal regulators applied pressure on financial institutions to cut off financial services to certain licensed, legally operating industries simply because certain regulators and policymakers disfavored those industries.” They added:

“We are especially worried that overreaching behavior by the banking regulators will inevitably bleed into other legal industries.”

The senators posed a number of questions to the regulators. They asked how their increased supervision will help consumers, whether it is possible for banks to provide services to crypto firms at all under the updated guidance and whether the agencies plan to release similar guidance for other industries.

Related: Banks under pressure from U.S. authorities to cut ties with crypto firms

With their letter, the senators are joining a conversation in the crypto community concerning the voluntary liquidation of Silvergate Bank. That talk may heat up with the FDIC’s closing of Silicon Valley Bank.

Powell Hearing Today: US Senator Bill Hagerty said he will discuss cryptocurrencies along with the Fed’s interest rate plans at the hearing on The Semiannual Monetary Policy Report to the Congress. Federal Reserve Chairman Jerome H. pic.twitter.com/xazQSFtK3p

— HappyMiner (@happyminerUS) March 6, 2023

Sens. Mike Crapo, Thom Tillis and Steve Daines were coauthors of the letter. Hagerty introduced the Digital Trading Clarity Act in the Senate in October. That act would provide a safe harbor for cryptocurrency exchanges from some Securities and Exchange Commission (SEC) enforcement actions.