TLDR
- Trump plans to sign an executive order this week protecting crypto companies and conservative groups from alleged discriminatory banking practices
- The order directs banking regulators to investigate violations of equal credit laws and consumer protection regulations
- Banks found in violation could face financial penalties and enforcement actions from regulators
- The measure targets “Operation Chokepoint 2.0” allegations that the Biden administration pressured banks to drop crypto clients
- Legal experts question whether the executive order exceeds presidential authority since political affiliation isn’t a protected class under federal law
President Donald Trump is preparing to sign an executive order as early as this week that would protect cryptocurrency companies and conservative organizations from alleged discriminatory banking practices. The proposed order would instruct banking regulators to examine potential violations of equal credit laws, antitrust statutes, and consumer protection regulations.
The move represents Trump’s response to what critics call “Operation Chokepoint 2.0.” This refers to the alleged systematic denial of banking services to crypto companies and politically conservative customers during the Biden administration.
Banks found in violation could face financial penalties and regulatory enforcement actions according to the draft order. The measure would direct federal agencies to dismantle internal policies that enabled debanking practices.
The proposed order references specific incidents including Bank of America’s decision to close accounts of a Christian organization in Uganda. The bank said this was due to its policy against serving small overseas businesses.
Trump has personal experience with banking discrimination, telling reporters that “big banks were very nasty to us” during Biden’s presidency. He noted that federal regulators, not bank executives, are the true decision-makers behind debanking practices.
Crypto Industry Legal Battles Continue
Coinbase continues legal battles to expose alleged “Operation Chokepoint 2.0” documents through Freedom of Information Act lawsuits. Chief legal officer Paul Grewal recently accused the FDIC of systematic obstruction despite court orders compelling disclosure.
The FDIC has already been forced to release multiple documents revealing apparent efforts to discourage banks from serving crypto companies. These documents showed the agency asked certain financial institutions to pause crypto banking activities.
Crypto venture capitalist Nic Carter coined the term “Operation Choke Point 2.0” in February 2023. He took inspiration from the Justice Department’s “Operation Choke Point” against banks and payday lenders in the 2010s.
Coinbase’s Paul Grewal testified at a Congressional hearing that the Biden-era FDIC “bludgeoned the banks” with examinations around crypto and stablecoins. He said banks “relented under the pressure” from regulators.
Legal Questions Surround Executive Authority
Legal experts question whether the executive order exceeds presidential authority. Alex Chandra, partner at Indonesia-based law firm IGNOS Law Alliance, told reporters that executive orders can only enforce existing laws, not create new protections.
“The lack of clear definitions around ‘political discrimination’ could make enforcement challenging,” Chandra said. He warned the order could create “a slippery slope where the government compels private businesses to serve clients they would otherwise decline.”
Political affiliation is not currently a protected class under federal anti-discrimination law. This means the government lacks a clear statutory basis to regulate or penalize this practice.
Courts might find the order “exceeds the President’s authority by effectively creating a new protected class without congressional action,” Chandra noted. Even if the orders are enacted, banks will likely find ways to drop customers they consider risky.
Banks have reportedly responded by revising their policies to explicitly prohibit political discrimination. They are also engaging with Republican state officials to demonstrate compliance with anti-discrimination measures.
The banking industry calls the practice “derisking” and financial institutions have broad discretion to close accounts. They can drop customers who pose legal, financial or reputational risks to the firm.
The Federal Reserve said in June that it would stop examining for reputational risk following similar moves by other banking regulators. Bo Hines, Executive Director of the White House’s Presidential Working Group on Digital Assets, confirmed administrative action was forthcoming.
