US President Donald Trump is preparing to sign a significant executive order instructing federal bank regulators to identify and penalize financial institutions participating in debanking practices.
According to Bloomberg and a senior White House official, the order requires regulators to review complaint data related to debanking. Furthermore, financial institutions overseen by the Small Business Administration will be urged to reinstate clients who were wrongfully denied banking services.
Debanking, the practice of blocking or denying businesses banking access, has been a growing concern for various political groups. They argue that companies, including gun manufacturers and fossil fuel firms, have faced banking service denials on ideological grounds.
This issue has also significantly affected the cryptocurrency sector. Allegations surfaced during the Biden administration about an initiative dubbed Operation ChokePoint 2.0, believed by some to be an attempt to push crypto businesses offshore during the 2022 market downturn.
Despite the differing approaches between administrations, complaints of debanking persist, particularly in the crypto industry. The upcoming executive order aims to remove the “reputational risk” category from regulatory guidance and training materials, a classification criticized for targeting crypto companies unfairly.
Banks Trying to Hinder Crypto Firm Banking Licenses
While the Trump administration moves to combat debanking, powerful banking associations are pushing back by challenging banking license applications from several crypto companies, including Ripple.
In a letter dated July 17 to the Office of the Comptroller of the Currency, associations such as the American Banking Association and National Bankers Association expressed concerns about whether the business plans of crypto applicants involve fiduciary activities typical of national trust banks. They also highlighted a lack of transparency in the public sections of these applications.
Ripple, the firm behind XRP cryptocurrency, applied for a US banking license on July 2, shortly after stablecoin issuer Circle filed to establish a national trust bank to manage its reserves.
These actions signify a deepening interaction between traditional banking and crypto enterprises, escalating competition in financial services.
Stablecoin companies have introduced innovative payment solutions that sometimes compete with infrastructure offered by traditional banks and credit card companies. The GENIUS Act, passed into law on July 18, regulates stablecoins and their issuers in the US market, further shaping this evolving landscape.
The debate over debanking highlights the broader challenges in integrating emerging digital asset businesses with established financial systems, with regulatory frameworks adapting to this fast-changing environment.
