Trump Issues Executive Order Against Crypto Banking Bias

By: Isha Das

In a significant move for the cryptocurrency industry, President Donald Trump has signed an executive order on August 7, aimed at halting discriminatory banking practices against the sector. This order explicitly prohibits federal regulators from influencing banks' decisions based on 'reputational risk,' a term previously used to justify the debanking of legal businesses in the digital asset space.

The cryptocurrency sector has claimed it faced undue pressure from regulatory bodies, leading to sudden account closures and disruption of financial services to law-abiding firms. The executive order targets what has been termed by critics as "Operation Choke Point 2.0"—a position that insinuates an informal regulatory campaign discouraging banks from providing services to digital asset companies despite their compliance with laws.

This modern iteration is reminiscent of a 2010s Department of Justice initiative that aimed to sever banking access to industries considered high-risk for fraud. Unlike its predecessor, the new focus has been largely on the crypto sector, with several firms reporting unexplained closure of accounts and financial disruption, often based on ambiguous risk assessments rather than specific compliance concerns.

Proponents of the cryptocurrency industry and some lawmakers have asserted that this environment stifles innovation, creates uncertainty, and hampers the growth of startups and institutional investors. Trump's executive order attempts to clear this uncertainty by codifying recent assurances from bodies like the Federal Reserve, FDIC, and Office of the Comptroller of the Currency, all of which have committed to cease evaluating institutions based on reputational factors. This legislative move aligns with current discussions in Congress about enacting similar protections, highlighting a governmental push towards a more crypto-friendly financial framework.

This executive action is seen as part of a broader initiative by the Trump administration to solidify protections for crypto companies within the U.S. financial ecosystem, ensuring they have the needed support to thrive and innovate without undue regulatory hurdles.