The view from Capitol Hill

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Congress has been busy (by its standards, at least) on the crypto front.

First, David Sacks — the country’s first AI and crypto “czar”— hosted an inaugural press conference, during which he declared a commitment to keeping digital asset innovation in the US. 

House and Senate Committee leadership also took this opportunity to unveil a new bicameral crypto working group. If this sounds like a committee of committees, it’s because that’s pretty much exactly what it is. 

Meanwhile, Sen. Bill Hagerty introduced a new stablecoin bill. The language is pretty similar to text we saw last Congress, focusing on reserve requirements and audits. It also allows non-banks to issue stablecoins, and has at least some bipartisan support, thanks to longtime crypto advocate Democrat Sen. Kirsten Gillibrand. 

Then, today, we got the first crypto-related hearing of the session. The Senate Banking Committee this morning gathered to discuss debanking and so-called “Operation Chokepoint 2.0.” 

The hearing coincides with reports that the FDIC plans to adjust its crypto guidelines and allow banks to participate in some crypto activities. 

It started out mellow enough. Chair Tim Scott talked about a life-changing loan he got from a community bank in the 90s. Ranking Member Elizabeth Warren said her office has identified more than 11,000 cases of individuals complaining of limited access to banking services. 

It seems both parties emphatically agree that debanking is happening, and it’s a problem. But what’s causing it and how to stop it are points of contention. It didn’t take long for the party lines to show. 

Being stripped of banking privileges for having a few bounced checks is unfair, said Warren, who focused most of her statements on individual customers vs. companies.

Not so fast, Sen. Thom Tillis countered. Banks shouldn’t be forced to service all customers. 

“That’s called managing a risk,” he said. 

Whether or not banks that refuse services to certain businesses and customers are doing so out of risk management or at the direction of federal regulators was also a point of contention. 

“The CFPB is the one agency that is actively working to stop unfair debanking,” Warren said. “Right now, the agency has five different rules — either in place or in progress — that would help prevent debanking by addressing some of the root causes, from overdraft fee practices to religious discrimination.”

The comment comes on the heels of the CFPB’s new acting chair, Treasury Secretary Scott Bessent ordering the agency to halt virtually all pending operations. 

Several Republicans argued the opposite. The issue of debanking is only exacerbated by federal agencies. 

“Under the Biden administration, we’ve seen the rise of what many are calling Operation Chokepoint 2.0 where federal regulators exploited their power, pressuring banks to cut off services to individuals and businesses with conservative dispositions, or folks aligned with industries they just didn’t like,” Scott said. 

Other Democrats took the hearing as an opportunity to voice concerns about DOGE, the new task force led by Elon Musk, and its access to the Treasury’s payments system. 

“The DOGE crowd, there is one person [who] maybe has clearance, and the others, we have no freaking idea,” Sen. Mark Warner said. He declined to use his allotted time to ask witnesses any questions. 

Like I said, politics is getting in the way. The victory lap the crypto industry has run since election night is bumping into some hurdles.

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