Governmental Debanking

In November 2024, debanking grabbed national headlines when venture capitalist Marc Andreessen appeared on the popular Joe Rogan podcast. Andreessen claimed that, driven by political motivations, government bank regulators had forced banks to close accounts of crypto customers. While crypto industry participants supported the claims, regulators denied debanking. Others branded the debanking allegations a right-wing conspiracy.

This is just the latest example of the debanking debate that has raged for decades with little resolution. This Article argues that this debate is undercutting public confidence in bank regulators and the banking system. It is time for a more permanent fix of the conditions that allow the debanking debate to persist. This Article identifies two features of the banking regulatory system that allow the debanking debate.

First, bank regulators have discretionary supervisory power to engage in debanking. Under the guise of reputation risk, anti-money laundering laws, or general concern about uncooperative bank management, bank regulators have the power to influence bank decisions for political reasons. Second, bank regulators’ supervisory actions are largely secret. This means that those alleging governmental debanking rarely have receipts.

But it also means that those who deny debanking lack proof. To stop the debanking debate, reforms must address both regulatory discretion and secrecy. The Article suggests ending regulators’ ability to punish banks for reputation risk, reforming anti-money laundering laws, and limiting penalties for non-compliance with regulator recommendations and suggestions. It also recommends that Congress require regulators to release more supervisory information and require banks to disclose reasons for customer account decisions.