- Federal Reserve Chair Jerome Powell said he believes some crypto debanking allegations are real.
- But he denied the Fed participated in alleged efforts to cut crypto out of the US banking system.
Crypto companies were likely “debanked,” Federal Reserve Chair Jerome Powell told lawmakers at a hearing this week.
Industry stakeholders have accused former President Joe Biden’s administration of having weaponised bank regulators in order to force the nascent industry offshore, in part by dissuading banks from serving companies that traffic in digital assets.
The accusations include improperly denying regular bank services such as checking accounts to these firms.
“We’re all struck at the number of complaints and the breadth of them,” Powell said, adding that “at least some of it is real. We need to understand it, and stop it from happening.”
“We need to do some work, get to the bottom of it and address this,” he said.
Powell made the comments during an appearance before the House Financial Services Committee Wednesday in the latest sign that this long simmering issue has come to a boil.
Donald Trump has pledged to make the US “the crypto capital of the planet.” Several lawmakers elected in November have thrown their weight behind those plans.
That includes several politicians — such as Senator Tim Scott, Representative French Hill, and Securities and Exchange Commission Commissioner Hester Peirce — who have pledged to tackle accusations of debanking.
Crypto critics have said regulators and banks were protecting themselves, and the financial system writ large, from the volatility of crypto.
Denials
During the hearing, Powell denied the Fed had improperly pressured banks to drop or reject crypto clients.
“In Fed-regulated banks, there are lots of crypto activities happening now,” he said.
“We’re not telling banks that they can’t bank certain people from certain [industries] — not anything like that.”
The Federal Reserve is not the only bank regulator to come under fire.
Similar accusations have been hurled at the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
At a pair of hearings last week, lawmakers questioned several executives who said they or their companies had struggled to keep or open bank accounts.
Asked by Scott how widespread debanking in crypto really is, Nathan McCauley, CEO and co-founder of Anchorage Digital Bank, shared an anecdote.
“I was speaking at a meetup of about 100 crypto founders in San Francisco,” he said. “As a show of hands I asked, ‘Who here has had trouble getting an account or with debanking?’ All of the hands in the room went up.”
Marc Andreessen
The issue was first raised by crypto investor Nic Carter in an essay for Pirate Wires in early 2023.
Crypto exchange FTX had imploded a month earlier, and scrutiny of crypto-friendly banks had intensified. Federal bank regulators and White House advisers released statements highlighting the industry’s risks.
It was important that crypto’s risks “do not migrate to the banking system,” read one warning from regulators at the time.
Banks, it continued, were “neither prohibited nor discouraged from providing banking services to customers of any specific class or type.”
The issue gained momentum in November when influential venture capitalist Marc Andreessen appeared on Joe Rogan’s podcast.
“This has been happening to all the crypto entrepreneurs in the last four years,” Andreessen said.
Aleks Gilbert is DL News’ New York-based DeFi reporter. You can reach him at aleks@dlnews.com.
