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The de-debanking of digital assets in the United States got another boost last week as the Federal Reserve (Fed) announced the withdrawal of guidance requiring banks to provide advance notification of planned or current digital asset activities. The Fed also released a joint statement with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), reversing two previous statements cautioning banks on their exposure to digital assets due to concerns about potential risks of fraud and scams.

On April 24, the Board of Governors of the Fed said it was rescinding its 2022 supervisory letter establishing an expectation that state member banks provide advance notification of digital asset activities.

“As a result, the Board will no longer expect banks to provide notification and will instead monitor banks’ crypto-asset activities through the normal supervisory process,” said the statement. “These actions ensure the Board’s expectations remain aligned with evolving risks and further support innovation in the banking system.”

The Board also rescinded a 2023 supervisory letter requiring banks to seek regulators’ permission before engaging in stablecoins activities.

The same day, in a related announcement, the Fed joined with the FDIC—the U.S. government organization that provides deposit insurance to depositors in American commercial banks and savings banks—and the OCC—an independent bureau within the Department of the Treasury that regulates and supervises all national banks and federal savings associations—to announce the withdrawal of two 2023 joint statements regarding banks’ digital asset activities and exposures.

The withdrawn joint statements, issued on January 3, 2023 and February 23, 2023, addressed digital asset risks and liquidity risks to banking organizations resulting from “market vulnerabilities,” including fraud, scams, legal uncertainties, and “significant volatility.”

By many in the digital asset industry these statements were seen as a form of indirect regulation, pressuring banks and financial institutions to not deal with digital asset companies, in line with a perceived anti-crypto agenda during the administration of former President Joe Biden.

In their announcement withdrawing the statements, the agencies explained that: “This action is intended to provide clarity that banking organizations may engage in permissible crypto-asset activities and provide products and services to persons and firms engaged in crypto-asset related activities, consistent with safety and soundness and applicable laws and regulations.”

The agencies added that they were exploring issuing additional clarity on banking organizations’ digital asset and related activities in the coming weeks and months.

These efforts to withdraw previous statements and provide additional clarity are part of an ongoing project under President Donald Trump to reverse the supposed debanking of the digital asset industry under his predecessor.

Digital asset debanking

‘Debanking’ refers to the process of financial institutions restricting or terminating banking services for certain businesses due to regulatory concerns, compliance risks, or perceived instability, and in the case of digital assets, all of the above.

Under Biden, key U.S. financial sector regulators, including the Fed, the FDIC, the OCC, and the Securities and Exchange Commission (SEC), appeared to notably increase their scrutiny of digital asset firms. This non-official project was given renewed impetus by several high-profile collapses and scandals in the digital asset space, such as FTX and Terra-Luna in 2022, and Binance in 2023.

In light of these various controversies, in January 2023 the Fed, FDIC, and OCC issued their joint statement warning banks about the risks of dealing with digital asset-related businesses.

Specifically, they said that “issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices.”

The Fed later published an order denying Custodia Bank’s application for membership, citing concerns about the risks of digital assets, which appeared to confirm industry fears that the administration and establishment had an anti-digital asset agenda.

This perception was only strengthened by the SEC’s hard-line approach to the industry under former Chairman Gary Gensler, which made dealing with digital asset companies potentially riskier and less profitable when there was always half a chance they may find themselves on the end of SEC charges for securities law violation.

These various regulatory measures were accompanied by—or, depending on who you talk to, caused—the 2023 collapse of several digital asset-friendly banks, Silvergate, Signature Bank, and Silicon Valley Bank.

In February 2023, digital currency advocate and venture capitalist Nic Carter coined the term “Operation Choke Point 2.0” to describe what he believed was this coordinated attempt by federal agencies to limit digital asset banking activity.

However, after Trump, a vocal proponent of the digital asset industry, took office in January, the landscape began to look decidedly different.

In February, a House Financial Services subcommittee hearing was called to examine “the negative effects of the Biden Administration’s Operation Choke Point 2.0,” in which Subcommittee chair Dan Meuser (R-PA) argued it had been an official policy of the former administration “carried out by the prudential regulators to target and debank the digital asset ecosystem.”

Reversing debanking in Trump 2.0 era

Efforts by lawmakers and regulators to reverse debanking got underway with gusto almost as soon as Trump was back in the White House.

On February 6, Travis Hill, the acting chairman of the FDIC, announced that the organization was “actively reevaluating our supervisory approach to crypto-related activities.” This was shortly followed—also in February—by the Trump administration dismantling the Consumer Financial Protection Bureau (CFPB), a federal agency tasked with supporting consumers in their dealings with financial institutions, such as banks, credit unions, payday lenders, debt collectors and—significantly—digital asset exchanges.

Shortly after being appointed to the role, acting CFPB director Russel Vought told CFPB staff to “cease all supervision and examination activity” and to halt any enforcement actions. The next domino to fall was the OCC, which clarified in March that digital asset activities are allowed in the federal banking system.

In a March 7 “Letter 1183,” the agency confirmed that: “Crypto-asset custody, certain stablecoin activities, and participation in independent node verification networks such as distributed ledger are permissible for national banks and federal savings associations.”

The letter also rescinded a requirement for OCC-supervised institutions to receive supervisory nonobjection—explicit approval from regulators—and demonstrate that they have adequate controls in place before they can engage in digital asset activities.

Meanwhile, in the legislative realm, on March 6 the Senate Banking Committee Chair Tim Scott (R-SC) published a bill specifically aimed at combatting digital asset debanking.

The ‘Financial Integrity and Regulation Management (FIRM) Act‘ would curtail the “weaponization of federal banking agencies” by eliminating the ability for regulators to use reputational risk as a measure to determine the safety and soundness of regulated financial institutions.

“As Chairman of the Senate Banking Committee, I have made addressing debanking a top priority,” said Scott, when announcing the bill. “This discriminatory and un-American practice should concern everyone, which is why I’ve led my colleagues in working to find tangible solutions.”

On March 13, the Senate Banking Committee voted to advance the bill.

With the U.S. establishment increasingly embracing the once much-maligned industry, it’s likely digital asset-supportive legislation, such as the FIRM Act, will be a common sight over the next four years of Trump’s second term.

Watch: It’s time for regulation to enable blockchain growth

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