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It’s Time to End the Bureaucrat’s Secret Weapon: Debanking

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«Debanking» has become a buzzword in Washington lately. The term refers to a controversial practice where crypto companies and other businesses have been cut off from banking services, allegedly due to pressure from federal regulators. Many in our industry have dubbed this «Operation Chokepoint 2.0,» comparing it to a previous Obama-era initiative that discouraged banks from serving certain legal but high-risk industries. The issue has sparked heated debate, with multiple congressional investigations examining whether regulators improperly pressured banks to deny services to crypto firms and other businesses.

I’m testifying before Congress about it today because my company experienced it firsthand, despite being a federally-regulated bank ourselves — and because debanking is widely misunderstood. To address this threat to American values, we first need to understand what happened.

Rather than regulators issuing clear, transparent rules on who banks can serve, debanking operates through a shadowy and democratically unaccountable process whereby regulators warn banks against serving certain types of customers not based on the individual risk they pose, but on hostility or bias towards an entire industry. Banks, facing the threat of enforcement action, penalties, or worse, are left with no choice but to comply. And law-abiding individuals and businesses are cut off from basic banking services, which can be devastating.

Here’s what it looked like for us: in June 2023, we received an urgent call from our bank of two and a half years. Despite an established banking relationship — we were even in active discussions about expanding into new partnerships — the bank abruptly informed us they were closing our account in 30 days because it was not comfortable with our crypto clients’ transactions, even though we told them the funds at issue were client payments for custody fees, and that these were fully documented as part of our rigorous compliance process. Our contact refused to provide any further explanation or allow us to speak to the bank’s risk management team.

Read more: Nic Carter — Why You Should (Still) Care About Silvergate

The irony was stark: we ourselves are a federally chartered bank, regulated and supervised by the OCC, subject to the same stringent capital, liquidity, and risk management expectations as any other national bank. Not once in the course of our partnership had our banking partner ever raised an issue with our account. We were a great bank customer — well-capitalized, well-regulated and well-run. Yet out of the blue, our bank abruptly cut us off with no explanation or recourse. While we were eventually able to find banks willing to partner with us, the impact of being nearly shut out of the banking system was devastating. It was extremely disruptive to our business and our clients, and contributed to the difficult decision we made in 2023 to lay off 20% of our workforce.

And we weren’t alone. Legitimate American businesses across our industry found themselves scrambling for basic banking services, spending time and resources on workarounds rather than innovation and growth, causing major disruption and even driving some out of business.

Regulators’ actions amounted to a de facto ban on banking the crypto industry, made even more destructive by its seemingly arbitrary enforcement — no one knew why some firms retained access while others were cut off, creating a climate of constant uncertainty. To be clear, if regulators had enacted such a major policy decision through proper channels, like formal notice-and-comment rulemaking, that would be one thing. But no rule was ever proposed, publicly debated, or subjected to legal scrutiny. Nor did Congress ever pass legislation to authorize the choking off of large parts of an industry from the federal banking system.

History shows us that without a permanent fix, this will happen again. Just over seven years ago, the FDIC apologized for the first iteration of “Operation Choke Point” — a concerted campaign to cut off banking to industries disfavored by regulators — promising to retrain its examiners. Fast forward to 2023, and those same debanking efforts, this time with a different politically disfavored industry, occurred again. Without action, Operation 3.0 is only a matter of time, and any industry could be the next target.

So how can we prevent this from happening again? Congressional oversight, like the hearing I will testify at today, is crucial to uncover the facts and hold the agencies accountable. Congress must also act to establish real safeguards: consider legislation requiring banks to provide fair access to banking services within the bounds of existing law, require agencies to annually certify that they are not pressuring banks to discriminate against lawful businesses, establish Inspector General whistleblower hotlines at the OCC, FDIC and Federal Reserve to report examiner misconduct, require banks to provide written explanations for account terminations, and mandate clear appeals processes.

Read more: U.S. Regulator Told Banks to Avoid Crypto, Letters Obtained by Coinbase Reveal

Such protections would ensure that no federal regulator can abuse its authority to quietly choke off law-abiding individuals, companies, and industries again. More immediate steps that the new Administration and Congress can take are to rescind the January 2023 joint banking regulators’ guidance that served as the nail in the coffin for many crypto businesses, and rescind the OCC’s interpretive letter 1179, which imposed arbitrary pre-clearance requirements that effectively locked many banks out of crypto activities.

These aren’t just procedural changes — they are essential to protect American innovation and ensure democratic accountability. When regulators have to own their decisions and defend them before the public and the courts, the backroom pressure campaigns end and transparency and rule of law prevails. The scrutiny should be on implied threats from bureaucrats, not on legitimate businesses following the rules. Until these reforms are implemented, everyone is at risk.

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Cathie Wood’s ARK Buys Over $13M Worth Coinbase Shares During Market Rout

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Cathie Wood’s ARK Investment Management took advantage of the $5.4 trillion U.S. equities market sell-off and purchased over 83,000 shares of Coinbase (COIN), increasing exposure to the crypto exchange even as prices dipped sharply across the board.

The total shares purchased were worth more than $13 million, taking Friday’s closing price for Coinbase.

According to ARK’s daily trading disclosure for April 4, Wood’s flagship ARK Innovation ETF (ARKK) bought nearly 55,000 Coinbase shares, with additional purchases coming from the ARK Next Generation Internet ETF (ARKW) and the ARK Fintech Innovation ETF (ARKF).

The timing is notable. Coinbase shares have slipped more than 12% during the market rout, while bitcoin and other cryptocurrencies showed resilience. The CoinDesk 20 (CD20) index dropped by 5.8% in the same period. The sell-off came after U.S. President Donald Trump unveiled his reciprocal tariffs against nearly every country in the world.

Read more: Bitcoin Begins to Decouple From Nasdaq as U.S. Stocks Crumble

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Bitcoin Posts Worst Q1 in a Decade, Raising Questions About Where the Cycle Stands

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Bitcoin just notched its worst first quarter in a decade, falling 11.7% as markets struggled to understand the new administration’s economic agenda.

The performance ranked 12th out of the past 15 first quarters, according to NYDIG Research’s data.

The drawdown invites a familiar question in crypto circles: is the cycle over? The last time bitcoin started the year this poorly was in 2015, during a prolonged slump following the 2013 peak and after the collapse of Mt. Gox, according to NYDIG. Back then, prices recovered modestly over the rest of the year before surging in 2016.

In the first quarter of 2020, amid a market sell-off tied to fears surrounding the COVID-19 pandemic, BTC saw a 9.4% drawdown but then recovered to end the year up over 300%. In other years with negative Q1 returns—like 2014, 2018 and 2022—bitcoin ended the year down sharply, coinciding with the tail ends of previous bull cycles, the research note said.

This time around, the backdrop is murky. Cryptocurrency prices surged after Donald Trump won the U.S. election in November after running a pro-crypto campaign. While under the Trump administration, the sector has been gaining greater regulatory clarity, and the U.S. Securities and Exchange Commission (SEC) backed off a number of lawsuits against crypto firms, it isn’t all bullish.

Trump unveiled his reciprocal tariffs against nearly every country in the world last week, leading to a massive $5.4 trillion U.S. equities market wipeout in just two days. This led to the S&P 500 index’s lowest level in 11 months and the Nasdaq 100’s entry into bear market territory. While bitcoin has outperformed so far, what will happen after Monday’s opening bell is unclear.

Historically, a weak Q1 doesn’t always spell doom for BTC, NYDIG’s data shows. The asset has bounced back in half of the years when it started in the red. The recent macroeconomic backdrop has seen analysts raise recession odds, which could test BTC’s role as a “U.S. isolation hedge.”
Read more: Chart of The Week: Will April Bring Good Luck or Fool’s Hope for Bitcoin?

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Chart of the Week: Bond Market Could be Bitcoin’s ‘Canary in the Coal Mine’ Signal

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Credit spreads are widening and have reached their highest levels since August 2024 — a period that coincided with bitcoin (BTC) dropping 33% during the yen carry trade unwind.

One way to track this is through the ratio of the iShares 3–7 Year Treasury Bond ETF (IEI) to the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). This IEI/HYG ratio, highlighted by analyst Caleb Franzen, serves as a proxy for credit spreads and is now showing its sharpest spike since the Silicon Valley Bank crisis in March 2023 — a moment that marked a local bottom in bitcoin just below $20,000.

Historically, bitcoin and other risk assets tend to fall during sharp credit spread expansions.

The key question now is whether this surge has peaked or if more downside lies ahead. If spreads continue to rise, it could reflect mounting stress in financial markets — and spell further trouble for risk-on positioning.

A credit spread represents the yield difference between safe government bonds and riskier corporate bonds. When spreads widen, it signals growing risk aversion and tightening financial conditions.

However, Friday’s market action seems to indicate that bitcoin is starting to decouple from the traditional markets, outperforming equities. One analyst event called it the new «U.S. isolation hedge,» indicating that BTC might be starting to act more like a safe haven or digital gold for TradFi investors.
Read more: Crypto Outperforms Nasdaq as BTC Becomes ‘U.S. Isolation Hedge’ Amid $5T Equities Carnage

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