“Debanking” has become a buzzword in Washington recently. The term refers to a controversial practice in which cryptic businesses and other companies have been cut off from banking services, allegedly due to pressure from federal regulators. Many in our industry have called this “Operation Chokepoint 2.0”, compared to a former Obama era initiative that deterred banks from serving certain legal but high-risk industries. The question has given rise to heated debate, with several congressional surveys investigating whether regulators were wrongly pressing banks to refuse services to cryptic companies and other companies.

I testify before Congress about it today because my company experienced it from first hand, despite being a federally regulated banking and because debank is very misunderstood. To tackle this threat to American values, we must first understand what happened.

Instead of regulators issuing clear, transparent rules for who banks can earn, debanking works through a shady and democratically unmatched process, whereby regulators warn the banks against serving certain types of customers not based on the individual risk, they they pose, but on hostility or bias against an entire industry. Banks facing the threat of enforcement measures, sanctions or worse are left no choice but to comply with. And law -abiding people and businesses are cut off from basic banking services, which can be devastating.

This is what it looked like for us: In June 2023, we received an urgent call from our bank of two and a half years. Despite an established banking relationship – we were even in active discussions about expanding to new partnerships – the bank suddenly informed us that they closed our account in 30 days because it was not comfortable with our Crypto clients’ transactions, even though we told The funds were about client payments for custody and that these were fully documented as part of our strict observations. Our contact refused to give further explanation or allow us to talk to the bank’s risk management team.

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The irony was sharp: We are ourselves a federally chartered bank, regulated and monitored by OCC, subject to the same strict capital, liquidity and risk management expectations as any other National Bank. Not even during our partnership, our bank partner had ever raised a problem with our account. We were a large bank customer-well-convictioned, well-regulated and well driven. Yet out of the blue, our bank suddenly cut us off without explanation or application. While we were eventually able to find banks that were willing to cooperate with us, the effect of being almost closed out of the banking system was. It was extremely disruptive to our business and our clients and contributed to the difficult decision we made in 2023 to dismiss 20% of our workforce.

And we were not alone. Legitimate US companies across our industry were in crawling for basic banking services, spending time and resources on solutions rather than innovation and growth, cause greater disturbance and even drive some out of operation.

The actions of the supervisory authorities constituted a de facto ban on banking the crypto industry, which became even more devastating by its seemingly arbitrary enforcement – no one knew why some companies retained access while others were cut off, creating a climate of constant uncertainty. To be clear if regulators had adopted such a large political decision through proper channels as formal announcement-and-more, that would be one thing. But no rule was ever proposed, publicly discussed or subject to legal control. The congress also did not pass the legislation to approve the suffocation of large parts of an industry from the federal banking system.

History shows us that without a permanent solution this will happen again. Just over seven years ago, FDIC apologized for the first iteration of “Operation Choke Point” – a coordinated campaign to cut off banks to industries that are unfavorable by regulators – and promised to retrain its examiners. Frop until 2023, and the same degradation effort, this time with another politically unfavorable industry, occurred again. Without action, Operation 3.0 is only a matter of time and any industry can be the next goal.

So how can we prevent this from happening again? Convention, like the consultation, I will testify today, is crucial to revealing the facts and holding the agencies responsible. Congress must also act to establish real protection measures: Considering legislation requiring banks provide fair access to banking services within the framework of existing law, agencies require to certify that they do not push banks to discriminate against legal companies, establish OCC, FDIC and Federal Reserve To report the examiner’s disproportionate requires banks to provide written explanations of account operations and mandate clear appeal processes.

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Such protection would ensure that no federal regulator can abuse his authority to quench law -abiding persons, businesses and industries again. More immediate steps that the new administration and Congress can take are to cancel January 2023 Joint Bank regulators’ guidance, which served as the nail in the coffin of many crypto companies, and resigned OCC’s interpretive letter 1179, which imposed a requirement for arbitrary prior clearance requirement Effectively many banks out of crypto activities.

This is not just procedural changes – they are important for protecting American innovation and ensuring democratic accountability. When supervisory authorities have to own their decisions and defend them to the public and the courts, it is highlighted baked car campaigns and transparency and the rule of law. The study should be on implied threats from bureaucrats, not on legitimate companies according to the rules. Until these reforms are implemented, everyone is in danger.