U.S. Senate's Banking Chair Pushes Debanking Bill After Crypto Uproar

The industry's ongoing campaign against the debanking of crypto businesses and leaders has secured a legislative push from a top U.S. senator, Tim Scott, who is championing a bill that would cut out federal banking regulators' ability to use "reputational risk" as a reason to steer banks away from customers.

That practice had been cited by Republicans as a problem area in recent congressional hearings, which examined how digital assets businesses had been systematically cut out of U.S. banking relationships because of perceptions that the regulators — including the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — didn't want them there.

As the chairman of the Senate Banking Committee, South Carolina's Tim Scott has rounded up fellow Republicans on that panel to back the bill — the Financial Integrity and Regulation Management Act, or FIRM Act — that cuts that phrase from any regulators' assessment of a bank's safety and soundness.

"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 on the bill, which said that ending debanking is among his top priorities. "This legislation, which eliminates all references to reputational risk in regulatory supervision, is the first step in ending debanking once and for all."

Senator Cynthia Lummis, a Wyoming Republican who is the leader of the digital assets subcommittee, had recently raised this specific point as a concern with the Federal Reserve's oversight.

"Americans deserve a transparent regulatory framework that fosters innovation in digital assets instead of smothering it with government overreach," she said in a statement.

Consumer advocates and several Democrats, including Senator Elizabeth Warren, have argued that the regulators' focus on digital assets had been warranted after the collapse of several major firms, fraud charges against industry leaders, major routine hacks of digital assets platforms and generally volatile markets have posed threats to the safety of investors.

Read More: Crypto's Debanking Worries Hit Another Big Stage in U.S. House