Banks Shouldn’t ‘Punish’ Crypto Industry, Republican Senators Urge

An increasing regulatory crackdown on banks serving the crypto industry may be “punishing an entire industry,” four Republican senators said in a letter to U.S. regulators.

Discouraging the crypto sector could exceed regulators’ mandate and resembles “Operation Choke Point,” the 2013 operation where the Department of Justice investigated banks that did business with legal gun vendors, according to the Thursday letter.

“We are especially worried that overreaching behavior by the banking regulators will inevitably bleed into other legal industries,” said the letter to Federal Reserve Chairman Jerome Powell, Acting Comptroller of the Currency Michael Hsu and Federal Deposit Insurance Corp. Chairman Marty Gruenberg. “Any industry could be potentially 'disfavored,' based on a given regulator’s ideological perspective.”

“The problems of the few should not drive the harm of many,” senators Bill Hagerty (R-Tenn.), Mike Crapo (R-Idaho), Thom Tillis (R-N.C.) and Steve Daines (R-Mont.) said, noting that revelations of Bernie Madoff’s Ponzi scheme didn't lead to banks cutting off other asset managers. "Regulators should not be punishing an entire industry."

They asked for a response by March 24.

On Jan. 3, the three regulators warned they would take a “careful and cautious” approach to banks’ interactions with crypto companies following a spate of collapses. Two days ago, Silvergate Bank, a lender with heavy exposure to the sector, said it is shutting down.