The legislation aims to eliminate reputational risk assessments in banking regulations, addressing concerns from crypto firms and conservatives.
Senate Banking Chair Targets Debanking Practices
Senate Banking Committee Chair Tim Scott (R-S.C.) has introduced a bill targeting debanking, a practice where banks close accounts deemed risky with little explanation. The bill, known as the Financial Integrity and Regulation Management Act, seeks to prevent regulators from using reputational risk as a factor in banking supervision.
Regulatory Overreach and Political Agendas
Scott criticized federal regulators for abusing reputational risk, stating, “It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses.” The bill would also prohibit agencies from issuing new rules or guidance based on reputational risk.
Crypto Industry and Republican Support
The bill has gained strong support from Republican lawmakers, including Sen. Cynthia Lummis (R-Wyo.), a vocal advocate for digital assets. “Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach,” Lummis said.
“Operation Choke Point 2.0” and Crypto Concerns
Debanking concerns date back to the Obama-era “Operation Choke Point,” which discouraged banks from working with high-risk businesses. Crypto firms argue they are now facing similar treatment, calling it “Operation Choke Point 2.0.” As the industry expands, many believe this legislation could provide much-needed regulatory relief.
Trump Administration’s Stance on Debanking
Former President Donald Trump has also taken aim at debanking, accusing banks of discriminating against conservatives. With Trump’s increasing support for the crypto industry, the debate over banking access is expected to intensify in the 2024 election cycle.
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