‘Debanking’ Debate Resurfaces Amid Trump’s Return to Office

Will Donald Trump’s return to the Oval Office bring a crackdown on “debanking?”

As the Financial Times (FT) noted in an opinion piece Tuesday (Dec. 31), there’s a debate about the topic in the financial world, with people like venture capitalist Marc Andreessen arguing that banks are cutting ties with customers on the political right, or with industries such as the cryptocurrency sector.

Conservatives, the report said, have taken to calling these actions “Operation Choke Point 2.0,” named for an Obama-era effort to limit banking access for controversial industries such as payday lenders.

The second Trump administration, writes the FT’s Joshua Franklin, could likely take action here. He points out that David Sacks, Trump’s pick for artificial intelligence (AI) and crypto czar, said there were “too many stories of people being hurt by Operation Choke Point 2.0” and that it needed to be addressed.

Meanwhile, Brian Brooks — comptroller of the currency during Trump’s first term — has suggested the new administration might resurrect his effort to introduce so-called fair access rules that require banks to have a financial reason for dropping a client.

Writing about the issue earlier this month, PYMNTS argued that while Andreessen’s claims might resonate with the frustrations held by many corners of the cryptocurrency and FinTech sectors, the reality could be far more nuanced than a political assault on those industries.

“After all, innovation typically moves faster than regulation, and the growing strain between traditional banks and future-fit FinTech and crypto firms can also be in part chalked up to the inevitable consequence of outdated regulatory frameworks, stricter know your customer (KYC) and anti-money laundering (AML) standards, as well as heightened fraud risks,” that report said.

Debanking, the report added, can present major obstacles for affected parties, especially if they depend on financial services to operate. For businesses, it could mean trouble accessing payment systems, getting credit or even simply making deposits. Critics contend that debanking can sometimes unfairly affect legal industries or marginalized groups, leading to concerns about financial inclusion and fairness.

“Without a coherent framework that provides clear guidelines for banks, FinTechs and crypto companies to manage KYC/AML risks, the current stalemate may be likely to persist,” PYMNTS wrote. “Bridging the divide could ultimately require more than soundbites and instead rest upon a systemic rethinking of how financial institutions, regulators and innovators can coexist in an increasingly complex financial landscape.”