The US regulator is aiming to finish the deplatformation of banks in "unfavorable" industries (like crypto).
Call it the CPR for Operation Choke Point.
The United States' Bureau for the Control of Currency, a national banking regulator led by former Coinbase attorney Brian Books, has proposed a rule prohibiting banks from blacklisting legal industries – presumably including cryptocurrency companies.
Under the proposed rule, banks would only be able to refuse to provide financial services to customers on the basis of "quantitative, risk-based standards set in advance" and not in response to political pressure.
The proposal published in the Federal Register on Friday makes no mention of cryptocurrency. But it will likely be welcome news for companies in this space that have long struggled to maintain or maintain bank accounts in the United States. Crypto firms have long relied on a handful of banks – Silvergate Bank, Signature Bank, and Metropolitan Commercial Bank among them – for their basic banking needs.
If banks in the world's largest economy were forbidden from discriminating against legitimate companies, this could theoretically undermine the attractiveness of permissionless, censorship-resistant payment systems like Bitcoin.
The OCC proposal specifically mentions Operation Choke Point, an Obama-era Justice Department initiative that was supposed to only shut down fraudulent companies and payday lenders by pressuring banks to close their accounts. In practice, there appears to have been widespread collateral damage.
"It became known that government agencies (but not the OCC) had pressured banks to block access to financial services to disadvantaged (but not illegal) sectors of the economy," the OCC proposed. This included the firearms and coal industries. Operation Choke Point officially ended in late 2017, but financial intermediaries are still being pressured by politicians and the public to take industries or individuals deemed unsavory or problematic out of the bank.
In its proposal, the regulator gave examples of political boycotts pressuring banks to stop providing financial services to family planning organizations or shotgun and rifle manufacturers.
"Neither the OCC nor the banks are well equipped to weigh risks unrelated to financial risks and the operations required to provide financial services," the regulator wrote. "For example, climate change is a real risk, but also the risk of foreign wars caused in part by US energy dependency, and the risk of power outages caused by energy shortages" – in other words, not financial regulators or institutions.
The proposal can be publicly commented on until January 4th.
This week, US President Donald Trump named Brooks permanent head of the OCC for a five-year term. Congress has yet to vote on the nomination, which President-elect Joe Biden is expected to fill out if Brooks is not nominated by January 20, 2021.