- A congressional report accuses the Biden administration of using unclear regulations to restrict the crypto industry.
- Over 30 crypto firms lost banking access due to unclear guidance and informal pressure from regulators.
- The SEC and Federal Reserve’s actions have contributed to a climate of uncertainty, affecting institutional participation in the crypto market.
A new congressional report, led by Representative French Hill, accuses the Biden administration of stifling the U.S. cryptocurrency industry through regulatory pressure and unclear rules. The report claims that actions by federal agencies resemble the controversial Operation Choke Point from the Obama era, which targeted certain legal businesses, including payday lenders and ATM operators.
Lack of Clear Guidance Leads to Bank Closures for Crypto Firms
According to Hill’s repor t, the uncertainty surrounding cryptocurrency regulations has caused significant disruptions in banking access for digital asset firms. The report claims that over 30 crypto companies and individuals lost their banking relationships due to unclear guidelines and informal pressure from regulators.
Banks, unsure of how to navigate this regulatory environment, limited their exposure to crypto firms to avoid potential regulatory scrutiny. Committee staff members noted that banks were often cautioned about the risks of serving digital asset companies. This caution, they argue, led to a broader reluctance to engage with the crypto industry, even as some crypto businesses were operating legally.
Bryan Steil, Chairman of the Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee, agreed with the findings of the report. He underscored the negative impact of regulatory actions on innovation and employment in the crypto space. Steil argued that the issue of banking access became a result of regulatory decisions rather than the legal status of the businesses involved.
Impact of Federal Reserve and SEC Actions on Crypto Firms
The report also examines the role of other federal agencies, particularly the Securities and Exchange Commission (SEC) and the Federal Reserve. Both agencies have contributed to a climate of uncertainty by using enforcement actions, rather than clear guidelines, to regulate the industry. This, the report claims, has hindered the participation of institutions in the digital asset market.
The SEC’s approach, according to the document, has left businesses unsure about the rules they are expected to follow. Additionally, banking agencies such as the Federal Reserve have taken actions that made it more difficult for banks to engage with crypto firms. With the regulatory landscape still changing, Congress is busy drawing up new crypto legislation. Lawmakers have recently enacted the first national stablecoin law and a large market structure bill is in line for Senate consideration.
The report links such actions to the larger dialogue on crypto regulation, pointing out the increasing demand for clarity in the sector. Besides, the congressional report briefly mentions the transition of regulations from the Trump administration to the Biden administration. The Biden-era actions have led to the withdrawal of key supervisory documents issued by the previous administration, which may reduce the risk of further debanking in the digital asset sector.
