Bullish for the cryptocurrency industry? U.S. regulators to ban banks from unfairly discriminating against any industry sector

The U.S. Treasury Department's Office of the Comptroller of the Currency (OCC), led by former Coinbase Chief Legal Officer Brian Brooks, has proposed regulatory changes that would prevent banks from discriminating against any industry, indirectly enabling cryptocurrency companies to have broader access to banking services.

Ending Discrimination in Banking

The proposed rule change by the OCC would restrict national banks from arbitrarily refusing to provide financial services to any category of business entity unless they do not meet certain quantitative or risk standards. The OCC stated that it has been advocating for these regulations over the past decade:

"Consistent with the 'fair access to financial services' as required by the Dodd-Frank Act. Since 2014, the OCC has repeatedly stated that while banks are not obligated to provide any specific financial service to their customers, they are obliged to make all services they offer available to all customers unless individual customers present specific risk factors."

In other words, banks must conduct risk assessments for individual businesses and cannot refuse services to customers based on the category of business. The proposal was published in the Federal Register on Friday, with no mention of cryptocurrency. However, this is still good news for cryptocurrency companies in the United States, as the industry has long suffered from discrimination by the banking sector, unable to fairly access financial services and relying on a few crypto-friendly banks like Silvergate, Signature Bank, and Metropolitan Commercial Bank. Even the largest U.S. cryptocurrency exchange, Coinbase, only recently gained business support from JPMorgan."

Operation Choke Point in the Obama Era

Marco Santori, Chief Legal Officer of the U.S. cryptocurrency exchange Kraken, also noted on his Twitter that this regulation would help curb discrimination by banks against cryptocurrency service providers. He stated:

"Early participants in cryptocurrency know that the biggest obstacle to widespread adoption has always been (and still is) the lack of banking support. In the early days, Bitcoin was constrained by Operation Choke Point, and even now, despite widespread acceptance of cryptocurrencies, it remains a challenge."

2/ Crypto OGs know the single greatest impediment to widespread adoption has been and continues to be the lack of access to banking services.

In its early days, Bitcoin was caught up in Operation Chokepoint, and crypto more broadly is still caught up today

— Marco Santori (@msantoriESQ) November 20, 2020

Operation Choke Point was an initiative promoted by the Obama administration in 2014, requiring Federal Reserve regulatory officials to use their power to pressure banks to avoid dealings with businesses deemed unfavorable by the Obama administration. Ostensibly aimed at controlling illicit (but not necessarily illegal) money transactions, including firearms, coal industry, and adult industry, this practice caused serious harm to society and various industries. Reports indicated that even an adult film actress had her account frozen, preventing her from seeking medical treatment or receiving donations."

Operation Choke Point officially ended in late 2017, but many banks still decide at their discretion whether to provide financial services to their customers. Now, the OCC is making the most significant effort to prohibit banks from discriminating against business entities that comply with legal standards but are not favored by banks. While the proposed changes are quite extensive and the proposal does not specifically focus on cryptocurrency businesses, interpreting it as a positive development for the cryptocurrency industry is still reasonable.