The House Committee on Oversight and Government Reform is revisiting the Federal Deposit Insurance Corporation’s (FDIC) actions in the last administration.
The focus of this investigation is if financial institutions were forced to avoid digital assets which could be hindering innovation and restricting people’s and businesses’ access to banking services.
The FDIC’s new acting chairman, Travis Hill, has expressed worries that the agency under President Biden took an antagonistic view of banks trying to offer cryptocurrency services. A possible reason for this is reports of some businesses and individuals allegedly being debanked on account of their alleged involvement in crypto—which raised alarms over perceived overreach on the part of regulators.
Comer has requested unredacted FDIC documents pertaining to its communication with banks
Earlier in February, the FDIC released redacted versions of documents on their interactions with banks. 64 of those documents revealed the agency‘s correspondence with the 24 banks that received pause letters, and 111 documents showed FDIC correspondence and records on crypto-related activities of other regulated institutions.
However, Chairman James Comer of the House Committee on Oversight and Government Reform has insisted that full document disclosure is necessary to better understand the situation. He has already requested access to the FDIC’s uncensored records, hoping to see why the FDIC told banks to hold off on their crypto projects.
He’s also reached out to some tech leaders in the crypto space, asking them to divulge their debanking stories and experience with the FDIC. First Lady Melania Trump are also alleged to have been unlawfully debanked for their crypto ties, and the Oversight Committee is also investigating her case as well. As for now, Chairman Comer has claimed that they have to know if the federal regulators threatened the banks to drop their crypto activities, and therefore, their investigations are important.
He noted that the Committee is concerned about government regulators overreaching and arbitrarily suppressing industries they deem unfavorable. This has impacted business operations by restricting access to cash for payroll and driving technological and financial innovation overseas.
Caitlin Long claims Trump’s administration has not addressed the debanking issues
While Trump’s administration has maintained a pro-crypto stance from the start, Custodia Bank’s CEO Caitlin long feels that the administration has not done anything to address the debanking complications.
She said that the problem is that banks are still afraid that crypto is a dangerous place to invest, and the president has not tried to make them change their minds.
She has, however, called for Trump’s administration to appoint another FDIC lead.
Long said that the FDIC has only dragged down the banking system by refusing to accept technological alterations for over a decade under Martin Gruenberg’s leadership.
She, however, appreciated the government’s efforts to make the Securities and Exchanges Commission more crypto-friendly and hopes the same can be done to banking regulations.
She also wants the county to approve the stablecoin legislation, which will institute more consumer protection measures, including requiring banks to maintain their cash reserves to strengthen stablecoin liquidity.
The FDIC inquiry may be a pacesetter for the future of US crypto regulation. The oversight committee could make some serious changes if they find substantiated evidence that banks were pressured down a wrong road, including repealing clauses preventing financial institutions from banking with crypto firms. On the other hand, if the investigation concludes that the FDIC acted within its mandate, it could further entrench skepticism toward crypto in the banking sector.
