Senate Banking Committee Chair Tim Scott (R-S.C.) unveiled legislation Thursday taking aim at debanking.
Debanking — the closure of accounts that banks consider risky, often with little notice or explanation — has become a key issue for Republicans, particularly as the cryptocurrency industry argues it has been unfairly targeted.
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Scott’s Financial Integrity and Regulation Management Act seeks to remove references to reputational risk as a measure for determining the safety and soundness of depository institutions, like banks.
“It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses,” Scott said in a statement. “This legislation, which eliminates all references to reputational risk in regulatory supervision, is the first step in ending debanking once and for all.”
The legislation would also bar federal agencies from making new rules or guidance that utilize reputational risk. Scott was joined on the bill by his fellow Republicans on the Senate Banking Committee, including Sen. Cynthia Lummis (R-Wyo.).
“Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach,” said Lummis, who chairs the Senate Banking Subcommittee on Digital Assets.
“We’re putting these rogue regulators on notice—their days of unchecked power are over,” she added in a statement.
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Republicans have long voiced concerns about debanking, going back to the Obama administration’s “Operation Choke Point.” The controversial Justice Department initiative, which officially ended in 2017, discouraged banks from working with certain “high-risk” businesses.
Amid crypto’s rise in recent years, several individuals and firms associated with the industry say they’ve been debanked, a trend they’ve labeled “Operation Choke Point 2.0.”
Crypto has found a key ally in the GOP, particularly as President Trump has embraced the industry. Trump has also taken aim at debanking in the more traditional sense, accusing banks in January of refusing to work with conservatives.
