Investigating the Real Impacts of Debanking in America (U.S. Senate Committee on Banking, Housing, and Urban Affairs)

Hearings	Investigating the Real Impacts of Debanking in America
Committee	U.S. Senate Committee on Banking, Housing, and Urban Affairs
Date	February 5, 2025

 

Hearing Takeaways:

• Debanking: Committee Members and the hearing’s witnesses raised concerns over the problem of debanking. Debanking refers to situations where a financial institution cuts off banking services to customers (often without warning or legitimate cause). In these cases, banks will close customer bank accounts because the banks believe that the accounts pose a financial, legal, or reputational risk to the bank. Committee Members and the hearing’s witnesses lamented how many U.S. consumers and businesses have unfairly lost access to banking services based on their industry, ideology, and/or identity. They stated that this loss of access to banking services threatens the ability of these consumers and businesses to function in the modern economy. They expressed particular concerns regarding the extent to which bank regulator actions are driving debanking activities. They referenced recently released documents from the U.S. Federal Deposit Insurance Corporation (FDIC) and the U.S. Federal Reserve that indicate that bank regulators had pressured banks to pause cryptocurrency and blockchain technology-related activities and to consider whether a customer had made a “controversial statement” when assessing the customer’s reputational risk. They also expressed interest in exploring potential public policy remedies to address debanking.
  • Supervisory Discretion: Committee Republicans, Mr. Gannon, and Mr. Ring raised concerns that federal bank regulators have improperly employed their supervisory discretion to deny disfavored customers access to banking services (even if the customers are engaged in legal activities and businesses). Mr. Gannon stated that regulators engaging in debanking activities depend upon “broad, vague, and malleable” terms that can be subject to reinterpretation by supervisors. He asserted that these regulators are engaging in an approach of “strategic ambiguity” that could violate Article I of the U.S. Constitution. Sen. Pete Ricketts (R-NE) and Mr. Gannon further stated that bank regulators engaged in debanking often do not adhere to the Administrative Procedure Act’s notice-and-comment rulemaking requirements to evade Congressional oversight. Mr. Ring specifically criticized the extent to which law enforcement agencies delegate responsibility to banks to address money laundering under the Bank Secrecy Act (BSA). He asserted that this delegation of responsibility subjects banks to too much influence from their regulators. 
  • Regulator Use of Reputational Risk Assessments: Sen. Thom Tillis (R-NC) and Mr. Gannon raised concerns over how regulators often evaluate banks based on reputational risk. They asserted that this criterion is overly broad and subjective and that the use of reputational risk can lead banks to unfairly close customer accounts to appease regulators. Mr. Gannon also stated that the existing economic literature has not found a connection between reputational risk and basic elements of banking (such as capital, liquidity, and operations). Committee Democrats and Mr. Klein stated however that bank regulators should maintain reputational risk as a criterion in bank evaluations because banking is fundamentally a reputation-based business. They elaborated that a loss of trust in a given bank can foster bank runs.
  • Management Assessment Practices: Sen. Mike Rounds (R-SD) and Mr. Gannon raised concerns that bank supervisors have overly broad discretion in assessing the term “management.” They warned that bank supervisors can pursue almost any bank practices that they deem unacceptable under the guise of addressing bank management, regardless of whether the practices imapct the financial health of the bank. Mr. Gannon further questioned the veracity of current management assessments. He noted how the U.S. Federal Reserve’s November 2024 supervisory report had found that two-thirds of the U.S.’s large banks are not well-managed. He stated that these same banks have record levels of capital and liquidity and that these banks invest “enormous” amounts of money in technology and community reinvestment efforts.
  • Regulatory Scrutiny Towards the Cryptocurrency Sector: Committee Republicans, Mr. McCauley, Mr. Gannon, and Mr. Ring argued that bank regulators under previous Biden administration had unfairly applied scrutiny to the cryptocurrency sector, which had caused the sector to experience widespread debanking. Mr. McCauley discussed how his digital asset-focused bank (Anchorage Digital), other cryptocurrency businesses, and cryptocurrency industry employees had lost access to banking services in recent years. Committee Republicans and these witnesses criticized the January 2023 joint-statement from the U.S. Federal Reserve, the FDIC, and the U.S. Office of the Comptroller of the Currency (OCC) that had warned national banks to not service cryptocurrency-related clients and to not engage in their own cryptocurrency-related activities. They also criticized the FDIC and the U.S. Securities and Exchange Commission (SEC) for issuing Financial Institution Letter (FIL) 16-2022 and Staff Accounting Bulletin (SAB) 121 (respectively), which sought to prevent banks from custodying cryptocurrencies and from offering demand deposit services. Full Committee Chairman Scott further noted how the FDIC’s Office of Inspector General (OIG) had disclosed the existence of pause letters sent to financial firms between March 2022 and May 2023. Mr. McCauley testified that Anchorage Digital already meets the same Know Your Customer (KYC) and anti-money laundering (AML) standards as all other banks and asserted that increased regulatory scrutiny for his bank had been unnecessary. Sen. Jack Reed (D-RI) argued however that bank regulators had simply sought to respond to a new technology (i.e., cryptocurrencies) that could enable illicit activities and sanctions evasion. Mr. Klein also asserted that Silicon Valley Bank’s collapse (which had heavily impacted a stablecoin issuer) demonstrates that problems within the cryptocurrency industry can spread to the traditional financial sector if left unchecked.
  • Cannabis Industry Debanking Challenges: Full Committee Ranking Member Elizabeth Warren (D-MA), Mr. Gannon, and Mr. Klein also highlighted how many cannabis-related businesses and associated individuals had experienced debanking challenges, despite operating in state-sanctioned cannabis markets. However, Sen. Tillis disputed the assertion that cannabis businesses are being wrongfully debanked and highlighted how cannabis is illegal at the federal level. He stated that while he would be receptive to reexamining the legal status of cannabis, he contended that Congress should not pass federal cannabis banking legislation before determining the legal status of cannabis.
  • Role of Banks: A key area of debate during the hearing involved the culpability of banks in debanking certain individual and business customers. Several Committee Republicans and Mr. Ring argued that individual banks were primarily responsible for pursuing politically motivated debanking practices against disfavored industries and individuals. Mr. Gannon and Mr. McCauley argued however that banks were not carrying out their own political agendas when pursuing debanking activities. They stated that banks were simply responding to pressures from their regulators in making their debanking decisions. Mr. McCauley testified that Anchorage Digital had been in “active conversations” with their banking partners to expand their relationships when the company’s accounts had been closed.
  • The Fair Access to Banking Act: Sen. Kevin Cramer (R-ND) expressed support for the Fair Access to Banking Act, which would prohibit banks from categorically discriminating against legal industries. He stated that many bank executives have privately indicated support for this legislation because it would absolve them of pressure to deny banking services to certain industries. Mr. Ring raised concerns however that the Fair Access to Banking Act would require banks to prove that their decisions to not extend banking services to a given customer are legal. He stated that a bank’s need to justify its denials of service would result in significant reporting obligations for banks. He asserted that increasing the number of banks would be a better approach for ensuring sufficient access to banking services.
  • High Fees: Mr. Klein remarked that people are often debanked because the cost of basic banking services is too high. He elaborated that banks have unpredictable fees, banks often do not offer desired services, there exists a lack of trust in banks, consumers have privacy concerns regarding banks, and consumers face challenges opening accounts due to lack of identification or bad credit histories. He noted that while checking accounts are free for those that always have money, he indicated that Americans with less stable financial situations pay a “myriad” of fees for checking accounts that can reach over $500 annually. He also mentioned how most of the U.S.’s largest banks (as well as many small banks and credit unions) have voluntarily reformed their overdraft practices and estimated that these reforms would return $5 billion annually to financially vulnerable Americans.
  • U.S. Department of the Treasury’s 2023 De-Risking Strategy: Sen. Angela Alsobrooks (D-MD) mentioned how a 2023 U.S. Department of the Treasury report had examined circumstances where financial institutions had indiscriminately ended relationships with broad categories of people to mitigate risks. She stated that this report had demonstrated that unfair debanking practices often result in less financial inclusion and less fairness. She also stated that this report had found that unfair debanking had ultimately pushed consumers and businesses to more dangerous and more expensive financial products and services. She noted how this report had recommended that financial regulators promulgate rules that promote a supervisory culture that balances legitimate risk, mitigation, and strategies that support financial inclusion.
  • Community Reinvestment Act: Sen. Alsobrooks and Mr. Klein also expressed interest in the U.S.’s current enforcement of the Community Reinvestment Act, which requires banking agencies to assess the records of banking institutions in meeting the credit needs of communities that they serve. Mr. Klein raised concerns that many “overdraft predator banks” have received outstanding community reinvestment ratings from their regulators.
  • Due Process and Remedies for Debanked Individuals: Sen. Cramer and Mr. Gannon remarked that there needs to exist more transparency and more notice when debanking decisions are made. Mr. Gannon mentioned how President Trump had recently revived Executive Order (EO) 13892 and explained that this EO provides more due process to parties that wish to contest the actions of regulators. He also stated that the U.S. must provide “full and complete” remedies for those that have already experienced debanking harms. He warned that the U.S.’s failure to provide accountability and remedies for these debanking policies will result in the future continuation of debanking policies.
• Additional Policies: Committee Members and the hearing’s witnesses also used the hearings to discuss broader policy topics and to make policy proposals that could help address debanking.
  • Facilitating the Establishment of New Banks: Mr. Ring remarked that the solution to debanking should be market-based rather than regulatory-based. He specifically stated that the U.S. should make it easier for small banks to start and operate. He noted that the U.S. had lost 73 percent of its banks over the previous 40 years. Mr. Klein argued however that the U.S.’s declining number of banks was not due to regulatory burdens and was instead due to the lifting of restrictions on the ability for banks to operate in multiple states.
  • Promotion of Bank On Accounts: Mr. Klein recommended that the U.S. require all banks and credit unions to offer Bank On-style accounts. He explained that Bank On accounts are affordable, low-fee, and non-overdraft accounts and commented that these accounts are “wildly popular” among consumers.
  • Real-Time Payments: Sen. Chris Van Hollen (D-MD) and Mr. Klein contended that the U.S.’s implementation of a real-time payments system would reduce unnecessary bank fees (including overdraft fees) for customers, which would reduce the likelihood of customers being debanked. They expressed support for the Payments Modernization Act, which would require the U.S. Federal Reserve to move forward on implementing a real-time payments system.
  • Suspicious Activity Report (SAR) Filing Requirements: Committee Members, Mr. Gannon, and Mr. Klein raised concerns that the U.S.’s current SAR filing requirements are driving debanking activities. They argued that the U.S.’s current $10,000 currency transaction report (CTR) limit is too low and imposes significant reporting expenses on banks. They stated that banks will respond to these reporting requirements through raising fees, which can price customers out of their bank accounts. Sen. Andy Kim (D-NJ), Mr. Gannon, and Mr. Klein also questioned the effectiveness of these low CTR limits given how most SAR filings do not result in prosecutions. Sen. Kim called for more transparency for SARs and for the establishment of an appeals system for SARs. Mr. Gannon stated that the improved use of data and information would help policymakers to determine whether the reason behind a debanking is risk-based or politics-based. 
  • Industry-Focused SAR Filing Requirements: Mr. Klein further recommended that the U.S. adopt industry-focused SAR filing requirements to address industry-specific concerns. He stated that there exist certain areas (such as elder abuse) where SARs could require the collection of more information. He also applauded the Secure and Fair Enforcement (SAFE) Banking Act for its work to address SARs within the cannabis industry context.
  • “Do Not Bank” Lists: Full Committee Ranking Member Elizabeth Warren (D-MA) and Mr. Klein raised concerns over how Americans that experience bank account closures will appear on “do not bank” lists compiled by private companies. They lamented that these lists can unfairly prevent customers from opening bank accounts at new banks (regardless of the reason underlying the original bank account closure). Mr. Klein further expressed concerns that these “do not bank” lists have limited appeals processes.
  • Impact of the U.S. Department of Government Efficiency (DOGE) on Banking Sector: Committee Democrats and Mr. Klein raised concerns regarding DOGE’s activities to reform the activities of the U.S. Department of the Treasury and federal bank regulators. They argued that DOGE employees are inappropriately accessing sensitive U.S. taxpayer data and are undermining decisions of experienced federal employees that possess robust subject matter expertise regarding banking issues. Committee Republicans and Mr. Ring argued however that DOGE is acting admirably through providing valuable scrutiny of federal spending activities. Full Committee Chairman Tim Scott (R-SC) also noted how the U.S. Department of the Treasury had issued a statement indicating that the ongoing review of its systems is not resulting in the suspension or rejection of any payment instructions submitted to the Department by other federal agencies. He further noted how the U.S. Department of the Treasury’s statement indicates that the staffers engaging in this review will work with a Department employee and will only receive read-only access for the Department’s information.
  • Regulatory Staffing Levels: Sen. Raphael Warnock (D-GA) and Mr. Klein raised specific concerns that federal bank regulatory agencies are experiencing difficulties obtaining sufficient staff and that the Trump administration’s recent hiring freezes would exacerbate these difficulties. They warned that a reduced regulatory workforce would limit the U.S.’s ability to provide regulatory clarity, approve new bank charters, and respond to bank failures.
  • Private Sector Experience for Bank Regulators: Mr. Ring recommended that the U.S. should ensure that half of its bank regulators that are hired moving forward possess prior professional banking experience. He commented that seeking out individuals with professional banking experience would ensure that bank regulators understand the impacts of their regulations.
  • Role of the U.S. Consumer Financial Protection Bureau (CFPB): Committee Democrats and Mr. Klein stated that the CFPB is the main federal agency working to stop unfair debanking practices. They criticized efforts from Congressional Republicans and the Trump administration to terminate the Bureau and its work. Full Committee Ranking Member Warren and Mr. McCauley expressed support for establishing a database of CFPB debanking information. Mr. Kelin also expressed support for several CFPB rules, including the Bureau’s contract terms and conditions rule, Unfair or Deceptive Acts or Practices (UDAP) rule, larger participant rule, data broker rule, and overdraft rule.

Hearing Witnesses:

1. Mr. Nathan McCauley, Co-Founder and CEO, Anchorage Digital
2. Mr. Stephen Gannon, Partner, Davis Wright Tremaine LLP
3. Mr. Mike Ring, President, CEO, and Co-Founder, Old Glory Bank
4. Mr. Aaron Klein, Senior Fellow in Economic Studies, Brookings Institution

Member Opening Statements:

Full Committee Chairman Tim Scott (R-SC):

• He stated that the hearing would focus on ensuring fair access to financial services and asserted that every federally legal business and law-abiding citizen deserves to be treated equally (regardless of political views or ideological leanings).
  • He discussed how the U.S. had previously experienced widespread racial discrimination within its banking system and commented that the U.S. has taken actions to combat this discrimination.
• He recounted his experience obtaining a small business loan without any assets and mentioned how he had been able to qualify for a character loan.
  • He commented that his access to a character loan had been critical for him in starting his small business.
• He remarked that his experience obtaining a loan is not unique and commented that these experiences highlight how the U.S. has ample economic opportunities.
  • He called access to financial services a “cornerstone” of one’s ability to achieve the American Dream.
• He highlighted how the U.S. is home to a vast and competitive network of banks and payment providers and stated that the U.S. has one of the world’s most robust and diverse financial services ecosystems.
• He raised concerns however over recent reports of financial institutions cutting off services to digital asset firms, political figures, and conservative-aligned businesses and individuals.
  • He stated that federal regulators under the Biden administration had pressured banks to cut off services to businesses and individuals with conservative dispositions and to disfavored industries.
  • He asserted that the denial of banking services based on political ideology is “un-American.”
• He remarked that the hearing would explore how practices similar to Operation Choke Point have persisted, despite assurances that the practices would end.
  • He commented that these practices harm businesses, consumers, and the entire economy.
• He asserted that the issue of debanking should concern all Americans (regardless of political affiliation) and expressed interest in pursuing bipartisan action to address debanking discrimination.
  • He contended that no regulator and no bank should be above the principles of fairness and market access.
• He applauded the FDIC for its recent release of supervisory documents and stated that these documents prove that bank regulators had continued to pursue Operation Choke Point policies.
  • He commented that these documents demonstrate that bank regulators had engaged in “disgusting and disheartening” patterns of abuse.
• He noted how FDIC Acting Chairman Travis Hill had indicated that these documents and other bank regulator actions had strongly suggested to banks that it would be very difficult (if not impossible) to move forward with cryptocurrency-related activities.
• He applauded the new FDIC leadership for its commitment to transparency and lamented that an election was required for the FDIC to alter its course of action.

Full Committee Ranking Member Elizabeth Warren (D-MA):

• She called debanking a “real problem” and expressed hope that the Committee could address the problem in a bipartisan manner.
  • She commented that people and businesses require bank accounts to thrive in the modern economy.
• She explained that debanking occurs when a bank shuts down a customer’s bank account because the bank believes that the account poses a financial, legal, or reputational risk to the bank.
• She noted how a bank that closes a customer’s bank account may share this closure information with companies that receive payments to maintain “do not bank” lists.
  • She commented that this sharing of information with “do not bank” lists prevents the customer from opening up accounts at other financial institutions.
• She asserted that people should not arbitrarily be denied access to banks, locked out of their bank accounts, or stripped of their banking privileges. 
• She mentioned how her staff had reviewed the CFPB’s complaint database to identify cases where consumers had reported that they were unable to open bank accounts or that their bank accounts were wrongly closed.
  • She indicated that her staff had developed a supplemental memorandum regarding this data and submitted the memorandum for the hearing’s record.
• She noted how her staff had identified 11,955 such complaints and emphasized that this data only captures individuals that had filed complaints.
  • She indicated that her staff’s analysis of complaints encompasses the previous three years.
• She discussed how these complaints reported common themes, including a lack of warnings, explanations, dispute opportunities, and appeal opportunities.
• She also mentioned how the CFPB’s consumer complaint hotline has found millions of Americans have experienced debanking issues.
  • She stated that the banking industry has blacklisted tens of millions of customers because of overdrafts, criminal histories, having the same names as criminals, and ethnic and religious identities.
  • She added that many non-profit and charity organizations and lawful cannabis-related businesses (as well as their employees) have been unjustly debanked.
• She further highlighted how her staff had found that four large banks (Bank of America, J.P. Morgan, Wells Fargo, and Citibank) accounted for half of all of these complaints filed with the CFPB.
  • She commended President Trump for criticizing Bank of America for its debanking practices.
• She then suggested that banks might not be performing adequate risk assessments and stated that large banks are relying upon “black box algorithms” and outside companies to determine which accounts should be shut down.
• She remarked that the CFPB is the main federal agency that is actively working to stop unfair debanking practices and mentioned how the CFPB currently has five different rules (both in place and under development) to prevent debanking.
  • She elaborated that these rules address issues like overdraft fee practices and religious discrimination.
• She also stated that the CFPB is working to hold banks accountable when the banks unfairly close the accounts of law-abiding citizens and businesses.
  • She mentioned how she had sent a letter to President Trump regarding the CFPB’s work in this area.
• She raised concerns that U.S. Secretary of the Treasury and Acting CFPB Director Scott Bessent had recently halted all CFPB rulemaking, enforcement, investigations, and litigation against financial institutions engaged in illegal activities (including wrongful debanking).
  • She asserted that this halting of the CFPB’s activities would cause more Americans to be unfairly debanked and the loss of federal support in responding to debanking.
• She further remarked that the U.S. Department of the Treasury, the U.S. Federal Reserve, the FDIC, and other regulators must issue clear AML rules and guidance for banks.
  • She commented that these rules and guidance would reduce the incentive to use debanking as a form of risk management.
• She concluded by expressing her interest in working with Full Committee Chairman Tim Scott (R-SC) and President Trump to support the CFPB’s efforts to address debanking.

Witness Opening Statements:

Mr. Nathan McCauley (Anchorage Digital):

• He discussed how his company, Anchorage Digital, is an institutional cryptocurrency platform that supports the U.S.’s only federally chartered cryptocurrency bank.
  • He explained that Anchorage Digital provides a safe way for institutions to custody their cryptocurrencies at scale.
  • He mentioned how Anchorage Digital has 400 employees globally (including 282 employees across 37 states) and offices in South Dakota, New York, Portugal, and Singapore.
• He noted that while Anchorage Digital had started as a state trust company, he stated that the company had chosen to pursue an OCC national bank charter.
  • He indicated that this charter allows for Anchorage Digital to offer cryptocurrency custody, staking, settlement, and other services to its institutional clients.
• He mentioned how Anchorage Digital had received its national bank charter in January 2021 and indicated that this charter is the first and only one of its kind.
  • He testified that Anchorage Digital custodies billions of dollars in cryptocurrencies for a variety of institutions, including cryptocurrency protocols, asset managers, and sovereign wealth funds.
• He then discussed how Anchorage Digital had been “virtually shut out” of the federal banking system, despite being a federal bank.
• He noted how Anchorage Digital had held a corporate bank account with a partner bank since January 2021.
  • He indicated that this corporate bank account had held client fees for custody and other services, as well as general corporate funds for routine expenses (such as payroll and administrative expenses).
• He recounted how Anchorage Digital’s partner bank had told Anchorage Digital in June 2023 that their corporate bank account would be closed within 30 days.
  • He noted how this partner bank had indicated that it was not comfortable with Anchorage Digital’s cryptocurrency-related clients and their transactions.
• He testified that Anchorage Digital’s partner bank had refused to provide any further explanation to Anchorage Digital or allow Anchorage Digital to speak with the bank’s risk management team.
• He stated that this abrupt closure of Anchorage Digital’s corporate bank account had left him “shocked” and that Anchorage Digital had maintained a positive relationship with its partner bank for the preceding 2.5 years.
  • He testified that Anchorage Digital’s partner bank had never raised issues regarding Anchorage Digital’s corporate bank account.
  • He further testified that Anchorage Digital had been in active conversations with its partner bank to expand their relationship at the time that its corporate bank account had been closed.
• He remarked that Anchorage Digital had experienced “extreme difficulty” finding new bank partners after its original corporate bank account had been closed.
  • He testified that Anchorage Digital had spoken to approximately 40 banks across the U.S. about opening accounts and that all of these banks had rejected Anchorage Digital as a customer.
  • He added that many of these banks had indicated that they maintained blanket policies against serving cryptocurrency-related customers.
• He asserted that Anchorage Digital had experienced challenges accessing the U.S. banking system because regulators had pressured banks to not service the cryptocurrency industry.
  • He commented that his assertion is based on several regulatory actions related to cryptocurrencies and his own lived experience.
• He noted how his written testimony details a list of “anti-crypto” regulatory actions that had led to the mass debanking of the cryptocurrency industry.
  • He specifically asserted that the January 2023 joint-statement from the U.S. Federal Reserve, the FDIC, and the OCC warning national banks from servicing cryptocurrency-related clients or engaging in their own cryptocurrency-related activities had been particularly responsible for this mass debanking.
• He then mentioned that he is personally an investor in four cryptocurrency-related companies that have struggled to obtain or maintain bank accounts.
  • He indicated that some of these companies have needed to shut down during this period.
• He further testified that at least two of Anchorage Digital’s employees have experienced debanking and indicated that these employees have attributed this debanking to their association with the cryptocurrency industry.
  • He also mentioned how he had spoken to “dozens” of cryptocurrency industry leaders that have been personally debanked or that have had their cryptocurrency businesses debanked.
• He noted that while Anchorage Digital had eventually been able to find banking services, he described the impact of nearly being shut out of the banking system as “devastating.”
  • He testified that this debanking had contributed to the company’s decision to layoff 70 employees in the U.S.
• He mentioned how Anchorage Digital’s clients still lack the ability to send wire transfers to third-parties and indicated that Anchorage Digital’s clients had previously had access to this service.
  • He also testified that Anchorage Digital’s debanking had abruptly ended opportunities to provide sub-custody services to other national banks who were actively seeking out these services.
• He lamented how Anchorage Digital had been unable to access the federal banking system despite being a federally chartered bank.
  • He expressed support for Congressional investigations into widespread debanking for law-abiding citizens and companies.

Mr. Stephen Gannon (Davis Wright Tremaine LLP):

• He remarked that debanking is not a new problem and mentioned how the U.S. had previously engaged in Operation Choke Point.
  • He warned that “virtually unbound” supervisory discretion from bank regulators can impose significant challenges for banks.
• He recounted an instance where the FDIC had instructed a small bank to stop making tax refund anticipation loans (which he emphasized are legal).
  • He noted how the small bank had refused to stop making these loans and how the bank and its tax preparers were subsequently subjected to a special horizontal review.
  • He indicated that 400 FDIC examiners had staffed this special horizontal review.
• He remarked that regulators engaging in debanking activities depend upon “broad, vague, and malleable” terms that are always subject to reinterpretation by supervisors.
  • He asserted that these regulators are engaging in an approach of “strategic ambiguity.”
• He noted that a bank reputation risk does not relate to the financial condition of a bank and stated that bank reputation risk instead relies upon how a regulator perceives the reputation of a bank.
• He asserted that bank reputation risk is omnipresent and subject to unlimited discretionary judgement from bank examiners because reputation risk can impact any aspect of bank management and bank risk.
  • He commented that the terms “safety and soundness” and “risk of future harm” are subject to the same type of unlimited discretionary judgement from bank examiners.
• He also raised concerns that bank supervisors have overly broad discretion in assessing the term “management.”
• He warned that bank supervisors can pursue almost any bank practices that they deem unacceptable under the guise of addressing bank management, regardless of whether there exists an impact on the financial health of the bank.
  • He commented that a poor management rating from bank supervisors can have “disastrous” consequences for a bank’s business moving forward.
• He further raised concerns that the arbitrary discretion from bank regulators is not subject to meaningful challenges.
  • He commented that supervisory examinations are “shrouded in secrecy” and are not available for any effective review from the banks whose information is being analyzed.
• He noted how bank regulators contend that everything being done within the envelope of an examination is confidential supervisory information (CSI) and that the CSI is the property of regulators.
  • He asserted that this contention rests on weak legal and constitutional grounds.
• He then stated that the digital asset industry has faced heightened scrutiny from bank regulators.
• He mentioned how federal banking agencies had promulgated interpretive letters imposing an “unusual” prior restraint requirement on banks (called a supervisory non-objection) for banks seeking to engage in permissible cryptocurrency activities.
  • He commented that while these letters met the definition of a rule under the Congressional Review Act, he indicated that these letters had not been submitted to Congress for review under this law.
  • He also noted that no banks have sought to disobey these requirements.
• He remarked that the exercise of “nearly limitless” regulatory discretion from federal bank regulators distorts the relationship between regulatory agencies and Congress.
  • He discussed how Article I of the U.S. Constitution dictates that Congress delegates the entirety of an agency’s power and stated that an agency seeking to make a business illegal must obtain authority from Congress.
• He contended that the debanking of legal businesses ignores the U.S. Constitution and contradicts President Trump’s recent EO on Strengthening American Leadership in Digital Financial Technology.
  • He explained that the recent EO states that regulatory agencies must protect and promote fair access to banking services.
• He remarked that there exist a series of remedies that could be implemented to address debanking and indicated that his written testimony details these remedies.
• He also stated that the U.S. must provide “full and complete” remedies for those that have already experienced debanking harms.
  • He asserted that accountability and remedies are needed or the U.S. will risk a “terrible precedent” that ideology can control the U.S.’s regulatory agenda at the expense of banks and small businesses.
• He lamented that the spirit of Operation Choke Point did not end in 2017 and that similar debanking policies were later pursued.
  • He warned that the U.S.’s failure to provide accountability and remedies for these debanking policies will result in the future continuation of debanking activities.

Mr. Mike Ring (Old Glory Bank):

• He mentioned how his bank, Old Glory Bank, had launched in 2023 and seeks to provide a market solution to the problem of debanking.
  • He highlighted how his bank has a program meant to serve cryptocurrency-related businesses that need access to banking services.
• He stated that there exist two types of debanking: regulatory debanking and participant debanking.
• He remarked that it was not a coincidence that the FDIC and the SEC had issued FIL 16-2022 and SAB 121 (respectively) in April 2022.
  • He contended that these two agencies were working together to prevent banks from custodying cryptocurrencies and from offering demand deposit services.
• He stated that the inability of cryptocurrency companies to provide on-ramps and off-ramps between cryptocurrencies and fiat currencies prevents the companies from engaging in business.
• He then raised concerns over the prevalence of participant debanking, which he defined as the voluntary efforts of large banks to deny banking services to Americans that disagree with them.
  • He stated that debanking has impacted Americans with differing views on the COVID-19 pandemic and the COVID-19 vaccine, President Trump’s supporters (including First Lady Melania Trump), and other conservative causes.
• He remarked that Old Glory Bank had been established in response to this debanking and explained that Old Glory Bank is a “digital-first” banking service.
  • He mentioned that Old Glory Bank has grown from having less than $10 million in deposits to having over $170 million in deposits in less than two years.
  • He also mentioned that Old Glory Bank has grown from having 300 customers to having 50,000 customers across all 50 states.
• He testified that Old Glory Bank serves over 2,000 small businesses and stated that the bank offers better service than its larger competitors.
  • He also highlighted how Old Glory Bank’s service team is located within Oklahoma (rather than offshore).
• He then discussed how Old Glory Bank had developed its own financial technology (FinTech) solutions to protect access to banking services for its customers.
  • He indicated that these solutions include a PayPal equivalent (Old Glory Pay), a GoFundMe equivalent (Old Glory Alliance), and a cash deposit service (Old Glory Cash-IN).
  • He further mentioned how Old Glory Bank offers a free $100,000 line-of-duty death benefit (Old Glory Protect) to its law enforcement, military, firefighter (including volunteer firefighter), and U.S. border patrol agent customers.
• He remarked that the solution to debanking should be market-based rather than regulatory-based and stated that the U.S. should make it easier for small banks to start and operate.
  • He noted that 229 banks had closed or merged over the previous two years while only eight new banks had been started.
  • He also noted that the U.S. had lost 73 percent of its banks over the previous 40 years.
• He contended that the U.S.’s current rate of bank closures is not sustainable and reiterated his call for the U.S. to make it easier to start and operate banks.

Mr. Aaron Klein (Brookings Institution):

• He noted how 10 percent of U.S. households are currently unbanked or had been unbanked at some point within the previous year.
  • He commented that not having a bank account adds significant costs, makes people less healthy, and makes it impossible for people to fully participate in the U.S.’s increasingly digital economy.
• He contended that people are debanked because the cost of basic banking services are too high.
  • He elaborated that banks have unpredictable fees, banks often do not offer desired services, there exists a lack of trust in banks, consumers have privacy concerns regarding banks, and consumers face challenges opening bank accounts due to lack of identification or bad credit histories.
• He noted that while checking accounts are free for those that always have money, he indicated that Americans with less stable financial situations pay a “myriad” of fees that can reach over $500 annually.
  • He commented that these fees can make basic banking services unaffordable for these individuals.
• He recommended that the U.S. require all banks and credit unions to offer Bank On-style accounts.
  • He explained that Bank On accounts are affordable, low-fee, and non-overdraft accounts and commented that these accounts are “wildly popular” among consumers.
  • He added that the American Bankers Association considers Bank On accounts to be a best practice.
• He also remarked that the U.S. should reduce penalties and surprise fees that debank the financially vulnerable.
  • He mentioned how most of the U.S.’s largest banks (as well as many small banks and credit unions) have voluntarily reformed their overdraft practices and estimated that these reforms would return $5 billion annually to financially vulnerable Americans.
• He stated that the CFPB’s overdraft regulation would treat overdraft as a form of credit and asserted that this regulation should be allowed to proceed.
• He lamented however that the CFPB’s overdraft regulation would exempt banks and credit unions with under $10 billion in assets and commented that many financial institutions not subject to the rule maintain concerning practices. 
  • He highlighted how Armed Forces Bank (which is not subject to the rule) generates $92 in overdraft fees per customer while Bank of America (which is subject to the rule) generates slightly over $1 in overdraft fees per customer.
  • He contended that bank regulators must address situations where banks (regardless of size) generate the majority of their profits from overdraft fees.
• He then remarked that the U.S. must improve the design of its financial system to better serve working people and expressed frustration over the currently slow speed of electronic bank fund transfers.
• He noted that if the U.S. had instituted real-time payments when England had, then Americans would have saved over $100 billion in overdraft fees, check cashing fees, and payday loan fees.
  • He highlighted how 70 percent of check cashing service users have a bank account and commented that these services are only used because check cashing services provide immediate access to cash.
• He mentioned how the U.S. Federal Reserve has been legally required to reduce the amount of time that a bank cannot take action on a check and stated that the U.S. Federal Reserve has ignored this obligation for the previous 37 years.
  • He noted how the previous CFPB Director had called for the U.S. Federal Reserve to modernize its check processing practices.
• He expressed support for the Payments Modernization Act, which would ensure that checks would be immediately available for withdrawal from bank accounts.
  • He asserted that this legislation would be the most effective means for combating debanking through improving the quality of services that banks offer to financially vulnerable individuals.
• He then called on the U.S. to reform its AML system and commented that the U.S.’s $10,000 CTR is too low.
  • He noted that this $10,000 CTR limit had been set in 1972 and that this amount would be over $75,000 in current U.S. dollars if adjusted for inflation.
• He also highlighted how banks file 2.5 million SARs today, which is ten times more than the number of SARs filed 20 years ago.
• He noted how banks spend significant amounts of money preparing and filing SARs and how these expenses are passed along to customers and small businesses.
  • He commented that these high expenses cause bands to reduce access to services for low-profit customers.
• He further applauded the SAFE Banking Act for its work to address SARs within the cannabis industry context.
• He lastly called on the U.S. to reform “do not bank” list systems that eliminate access to banking services for consumers based on the customers being poor (rather than having engaged in fraud).
  • He stated that the Bank On program has helped to address this problem and commented that this problem should be more broadly addressed.

Congressional Question Period:

Full Committee Chairman Tim Scott (R-SC):

• Chairman Scott remarked that the Biden administration had taken several actions that have likely contributed to the debanking of cryptocurrency firms. He mentioned how federal prudential regulators had issued a joint statement in January 2023 urging banks to limit their exposure to cryptocurrency activities and associated risks. He noted how the FDIC’s OIG had disclosed the existence of pause letters sent to financial firms between March 2022 and May 2023. He explained that these letters had asked firms to pause planned or ongoing cryptocurrency-related activities and to provide additional information. He also mentioned how the SEC had issued SAB 121 and commented that this action had effectively prevented banks from holding digital assets in custody. He remarked that these actions had collectively fostered an environment where banks became reluctant to work with cryptocurrency firms. He then stated that Old Glory Bank has worked to provide banking services to individuals and businesses that have experienced debanking. He asked Mr. Ring to discuss Old Glory Bank’s interactions with federal bank regulators.
  • Mr. Ring remarked that he is not afraid of bank regulators when it comes to providing access to banking services for lawful consumers and companies. He stated that while FDIC FIL 16-2022 makes reasonable demands regarding safety and soundness, he lamented that bank examiners had used this letter to stop banks from serving as on-ramps and off-ramps between fiat currencies and cryptocurrencies. He criticized the letter for preventing banks from serving legal cryptocurrency firms. He then criticized SEC SAB 121 for requiring banks to treat cryptocurrencies as liabilities (and thus hold capital against these holdings). He expressed appreciation that this action had been rescinded.
• Chairman Scott then noted how Anchorage Digital is the only OCC-related federally chartered cryptocurrency bank in the U.S. He remarked that the OCC’s approval of Anchorage Digital should provide the bank with legitimacy and access to traditional banking services. He stated however that Anchorage Digital has still struggled to access the traditional banking system, even though it is a bank. He called this situation “unacceptable.” He asked Mr. McCauley to discuss Anchorage Digital’s experience being debanked and how this debanking had impacted its business operations. He also asked Mr. McCauley to address how this debanking had impacted Anchorage Digital’s ability to make payroll for its employees and had forced the bank to layoff 20 percent of its employees.
  • Mr. McCauley remarked that the first effect of the debanking of the cryptocurrency industry was the erosion of trust in the U.S. banking and justice systems. He stated that the second Trump administration should work to restore the cryptocurrency industry’s trust in the U.S. banking and justice systems.
• Chairman Scott remarked that the weaponization of government in any one area fosters mistrust of the entire government. He asked Mr. McCauley to indicate how widespread debanking is within the cryptocurrency space.
  • Mr. McCauley recounted how he had spoke at a meetup of about 100 cryptocurrency firm founders and testified that all of these founders had reported experiencing difficulties obtaining a bank account or being debanked. He remarked that banking access challenges within the cryptocurrency space are very pervasive and have become an accepted nuisance within the cryptocurrency industry.

Full Committee Ranking Member Elizabeth Warren (D-MA):

• Ranking Member Warren remarked that the Committee must work in a bipartisan manner to address the problem of debanking. She stated that many Muslim Americans, cannabis businesses, and formerly incarcerated individuals have lost their bank accounts for no apparent reason. She expressed interest in discussing the recourse options that consumers have (or do not have) when they have experienced debanking. She noted how Anchorage Digital had lost its bank account and had unsuccessfully attempted to open new bank accounts with dozens of other banks (including with some of the U.S.’s largest banks). She asked Mr. McCauley to identify which of the U.S.’s largest banks had refused to open bank accounts for Anchorage Digital.
  • Mr. McCauley remarked that it would not be productive to identify the individual banks that had refused to open bank accounts for Anchorage Digital. He asserted that these banks had been victims of federal regulatory policies.
• Ranking Member Warren commented that she wants to identify the banks that had refused to open banks accounts for Anchorage Digital because the Committee could pursue recourse against inappropriate behavior. She then asked Mr. McCauley to indicate whether Anchorage Digital could have appealed the bank decisions that had denied Anchorage Digital’s applications to open bank accounts.
  • Mr. McCauley testified that banks had not provided Anchorage Digital with an opportunity to appeal the denials of their bank account applications.
• Ranking Member Warren called it unfortunate that Anchorage Digital had not been provided with opportunities to appeal the denials of their bank account applications. She noted how the CFPB has accepted 11,955 complaints over the previous three years from consumers and organizations that had been unable to open bank accounts or that had experienced wrongful closures of their bank accounts. She asked Mr. McCauley to indicate whether it would be useful for there to exist a database for this information to identify trends, the types of individuals and businesses experiencing problems accessing bank accounts, and the banks that are restricting access to banking services.
  • Mr. McCauley remarked that more data and more transparency regarding banking access would be helpful.
• Ranking Member Warren remarked that Anchorage Digital should not be denied access to the U.S. banking system. She stated that bank account closures can threaten the ability of businesses to make their payrolls or pay rent on time and lamented that these closures can occur without explanation. She asked Mr. McCauley to indicate whether people that are illegitimately debanked deserve protections and a process for appealing bank account closures.
  • Mr. McCauley answered affirmatively. He stated that the U.S. should take action to ensure that federal bank regulators do not promote unfair debanking practices moving forward.
• Ranking Member Warren remarked that banks should not adopt policies that routinely debank individuals based on their beliefs or other illegitimate reasons. She asked Mr. McCauley to indicate whether consumers should be protected from being debanked based on their political or religious beliefs.
  • Mr. McCauley answered affirmatively. He noted how many cryptocurrency industry-linked individuals had been debanked. He stated that federal banking agencies should have helped these individuals.
• Ranking Member Warren asked Mr. McCauley to indicate whether other types of individuals beyond those linked to the cryptocurrency industry should be protected from being debanked.
  • Mr. McCauley answered affirmatively.
• Ranking Member Warren remarked that the CFPB has long been “on the front lines” of efforts to combat debanking. She mentioned how the CFPB had previously added debanking to the list of illegal practices that bank examiners should pursue. She also mentioned how the CFPB had more recently developed rules to address debanking practices from payment applications and third-party data aggregators. She explained that banks use third-party data aggregators to decide when to deny access to banking services. She further mentioned how the CFPB had recently proposed a rule to stop companies from fining users for certain types of speech on their platforms. She asked Mr. Klein to discuss how the CFPB’s rules help stop unfair debanking practices.
  • Mr. Klein remarked that the CFPB is on the “forefront” of protecting consumers and ensuring that consumers have access to high quality and fair banking practices. He stated that bank regulators by contrast are often too focused on banks. He expressed support for several CFPB rules, including the Bureau’s contract terms and conditions rule, UDAP rule, larger participant rule, data broker rule, and overdraft rule. He noted that the CFPB’s data broker rule would apply to credit reporting agencies (CRAs) that maintain de facto “do not bank” lists and commented that these lists have limited appeals processes. He also stated that most unbanked individuals attribute their lack of bank accounts to the cost of maintaining said accounts. He commented that overdraft fees contribute significantly to the cost of maintaining bank accounts.
• Ranking Member Warren asserted that the CFPB is well-positioned to combat debanking. She warned that impediments to the CFPB’s functioning cause people to experience debanking.

Sen. Mike Rounds (R-SD):

• Sen. Rounds remarked that the hearing demonstrates that there exist different focuses on the issue of debanking. He elaborated that some view regulators as the drivers of problematic debanking practices while others view banks as the drivers of problematic debanking practices. He then discussed how Anchorage Digital is the first and only federally chartered cryptocurrency bank. He also noted how Anchorage Digital is a qualified custodian and has a conditional OCC bank charter. He asked Mr. McCauley to indicate the nature of Anchorage Digital’s accounts with other banks.
  • Mr. McCauley indicated that Anchorage Digital has checking accounts with other banks and uses other banks to hold its capital reserves. He further indicated that Anchorage Digital holds cash for its clients at partner banks.
• Sen. Rounds asked Mr. McCauley to indicate whether any aspects of Anchorage Digital’s banking activities are illegal.
  • Mr. McCauley answered no.
• Sen. Rounds asked Mr. McCauley to indicate whether Anchorage Digital had ever overdrafted from its bank accounts.
  • Mr. McCauley answered no.
• Sen. Rounds asked Mr. McCauley to indicate that Anchorage Digital had been debanked because of its cryptocurrency holdings (rather than because of business reasons).
  • Mr. McCauley remarked that Anchorage Digital had been debanked because of its cryptocurrency holdings. He also stated that the bank that had debanked Anchorage Digital had been actively attempting to increase its engagement with Anchorage Digital.
• Sen. Rounds remarked that Anchorage Digital’s bank had not wanted to debank Anchorage Digital. He asked Mr. McCauley to indicate why Anchorage Digital’s bank had decided to debank Anchorage Digital.
  • Mr. McCauley testified that Anchorage Digital’s previous bank had wanted to extend banking services to Anchorage Digital. He also testified that several additional banks had wanted to extend banking services to Anchorage Digital. He stated however that these banks had been concerned that they would be subjected to regulatory risks if they were to extend banking services to Anchorage Digital.
• Sen. Rounds emphasized that Anchorage Digital was not engaged in a federally illegal activity (such as cannabis activities) and had not engaged in over drafting. He remarked that Anchorage Digital was involved with a legal industry that regulators had discouraged banks from engaging in business with. He asked Mr. McCauley to confirm his description of Anchorage Digital’s situation.
  • Mr. McCauley confirmed Sen. Rounds’s description of Anchorage Digital’s situation. He remarked that Anchorage Digital had always complied with rules and regulations.
• Sen. Rounds then asked Mr. Gannon to indicate whether debanking activity stems from banks not wanting to service parties engaged in certain legal lines of business that might attract regulatory scrutiny. He also asked Mr. Gannon to discuss how bank regulators can respond to banks that do not wish to comply with written or implied demands.
  • Mr. Gannon remarked that bank regulators have significant influence capabilities over banks. He commented that banks tend to want to maximize their customer bases and do not want to turn away customers. He stated that bank regulators possess many tools and commented that these tools are almost completely discretionary.
• Sen. Rounds interjected to comment that the tools of bank regulators are supervisory in nature. He noted how bank regulators could threaten to change a bank’s CAMELS system rating if the regulators disapprove of the bank’s activities. He asked Mr. Gannon to address how changes to a bank’s CAMELS system rating can impact the bank.
  • Mr. Gannon explained that the decision of bank regulators to change a bank’s CAMELS system rating can limit a bank’s expansion opportunities and increase the bank’s deposit insurance costs. He commented that bank regulators can therefore significantly influence a bank through threatening to change a bank’s CAMELS system rating. He specifically highlighted how bank regulator assessments of bank management practices can significantly impact the bank’s CAMELS system rating. He noted how the U.S. Federal Reserve’s November 2024 supervisory report had concluded that two-thirds of the U.S.’s large banks are not well-managed. He stated that these same banks have record levels of capital and liquidity and that these banks invest “enormous” amounts of money in technology and community reinvestment efforts. He disputed the U.S. Federal Reserve’s November 2024 conclusion.
• Sen. Rounds applauded the Committee for holding a hearing on debanking. He expressed frustration that U.S. bank regulators have prevented U.S. banks from engaging with legitimate businesses. He asserted that these actions from bank regulators must stop.

Sen. Jack Reed (D-RI):

• Sen. Reed discussed how bank regulators often cite reputational risk as a key factor informing their decisions. He mentioned his efforts to develop a compromise within the SAFE Banking Act that would have provided guardrails around how bank regulators consider reputational risk. He asked Mr. Klein to discuss the importance of maintaining reputational risk as a factor for bank evaluations. He also asked Mr. Klein to discuss potential guardrails that could accompany the use of reputational risk as a factor for bank evaluations.
  • Mr. Klein expressed support for the SAFE Banking Act’s approach for considering reputational risk in bank evaluations. He remarked that banking is fundamentally a reputation-based business and that trust is a fundamental element of the banking system. He commented that a loss of trust in banks can foster bank runs. He asserted that reputational risk must therefore be used in regulating and supervising banks.
• Sen. Reed then mentioned how Old Glory Bank had highlighted the dangers associated with money laundering and terrorist financing. He stated that cryptocurrencies are often used to finance hostile regimes and illicit activities. He asked Mr. Ring to indicate whether the greater prevalence of cryptocurrencies in illicit financing activities requires banks and bank regulators to take a more cautious approach when dealing with the cryptocurrency space.
  • Mr. Ring criticized the extent to which law enforcement agencies delegate responsibility to banks to address money laundering under the BSA. He asserted that this delegation of responsibility subjects banks to too much influence from their regulators. He also commented that this delegation of responsibility is unique to the banking sector.
• Sen. Reed remarked that bank regulators are attempting to respond to a relatively new technology (i.e., cryptocurrencies). He noted that hostile regimes (such as North Korea) and terrorist groups derive significant revenue from cryptocurrency operations. He stated that there must exist a heightened awareness amongst industry participants and regulators regarding cryptocurrency-related risks. He commented that banks that do not deal with cryptocurrencies do not face similar risks.
  • Mr. Ring remarked that all banks are concerned about money laundering and terrorism. He expressed doubts that the BSA could meaningfully address these risks.
  • Mr. Klein questioned whether all banks are concerned about money laundering and terrorism. He discussed how the U.S.’s AML system creates an economic structure where costs are very high and commented that these high costs cause banks to turn away low profit customers. He stated however that some banks are willing to pay the AML fines associated with high profit customers. He remarked that the economics underlying the U.S.’s AML system are often not aligned with the system’s objectives. He stated that the U.S.’s AML system has resulted in the overreporting of unnecessary information and banks enabling money laundering because the profits associated with money laundering activities can exceed the fines accompanying said activities.

Sen. Thom Tillis (R-NC):

• Sen. Tillis recounted how his father’s construction business had relied upon 90-day notes for financing. He stated that modern construction businesses likely cannot obtain 90-day notes because regulators would view these notes as being unsafe. He asserted that over regulation is likely causing people to lose access to banking services. He then disputed Full Committee Ranking Member Elizabeth Warren’s (D-MA) characterization that Americans are being wrongfully debanked because of repeated check bounces. He contended that banks should not be expected to service these customers because these customers have demonstrated a pattern of risky behaviors. He also disputed the assertion that cannabis businesses are being wrongfully debanked and highlighted how cannabis is illegal at the federal level. He stated that while he would be receptive to reexamining the legal status of cannabis, he contended that Congress should not pass federal cannabis banking legislation before first determining the legal status of cannabis. He then remarked that the U.S. has a significant amount of regulator-initiated debanking based on reputational risk. He also raised concerns that interpretations of reputational risk can be subjective across administrations. He asked Mr. Gannon to indicate whether the growing prevalence of debanking activities is directly attributable to regulatory influence.
  • Mr. Gannon answered affirmatively.
• Sen. Tillis interjected to remark that the term “reputational risk” is overly broad.
  • Mr. Gannon expressed agreement with Sen. Tillis’s contention that the term “reputational risk” is very subjective. He remarked that banks face significant difficulties making plans because the demands of bank regulators and supervisors are not clear to banks.
• Sen. Tillis remarked that the actions of bank regulators increase costs for banks, reduce market opportunities, and make it more difficult for banks to service less profitable customers. He expressed interest in having the Committee focus on regulator-initiated debanking. He commented that the Committee could hold a separate hearing to address instances where people lose financial services based on certain behaviors (such as check bouncing). He requested that Mr. Gannon to provide the Committee with examples of regulator-initiated debanking for the hearing’s record.
  • Mr. Gannon expressed his willingness to provide the Committee with examples of regulator-initiated debanking for the hearing’s record.

Sen. Mark Warner (D-VA):

• Sen. Warner stated that while reputational risk considerations have been overused to limit bank activities, he remarked that banking remains a reputation-based business. He elaborated that bank reputation problems can cause bank runs. He then discussed how the U.S.’s reputation supports the U.S. dollar and the federal government. He raised concerns over the creation of DOGE and DOGE’s access to sensitive information within the U.S. Department of the Treasury. He asserted that DOGE’s actions threaten the U.S.’s reputation and payments system. He further raised concerns that many DOGE staff members lack the necessary vetting to perform reviews of U.S. government offices and programs. He commented that a financial institution that had allowed for unvetted individuals to fully access their payments system or private customer banking information would experience a precipitous decline in reputation.
  • Mr. Klein expressed agreement with Sen. Warner’s comments. He mentioned how he had held a Top Secret security clearance while working in the U.S. Department of the Treasury and stated that he would never access private customer banking information. He asserted that DOGE’s efforts would not drive efficiency. He stated that the U.S. could make the U.S. payments system more efficient through transitioning to a real-time payments network. He commented that the U.S. should have transitioned to a real-time payments network long ago.
• Sen. Warner also stated that determinations regarding the legality of payments should not be made within the U.S. Department of the Treasury’s payments system. He commented that federal agencies should make these determinations because federal agencies have subject matter expertise. He reiterated his concern that DOGE’s efforts are undermining the U.S.’s global reputation. He expressed frustration that unidentifiable DOGE staff are eliminating government programs without transparency. He remarked the Committee should investigate these activities. He warned that the ability of DOGE staff to stop payment flows will harm U.S. national security. He noted how the U.S. often funds national security-related programs under a cover so that the U.S.’s enemies cannot comprehend the U.S.’s national security activities. He remarked that the Committee should determine the identities of DOGE staff and the security clearance statuses of these staff.

Full Committee Chairman Tim Scott (R-SC):

• Chairman Scott noted how the U.S. Department of the Treasury had just issued a statement indicating that the ongoing review of its systems is not resulting in the suspension or rejection of any payment instructions submitted to the Department by other federal agencies. He also noted how the U.S. Department of the Treasury’s statement emphasizes that this review has not caused payments for Social Security and Medicare to be delayed or rerouted. He further noted how the U.S. Department of the Treasury’s statement indicates that the staffers engaging in this review will work with a Department employee and will only receive read-only access to the Department’s information.

Sen. Mark Warner (D-VA):

• Sen. Warner asked Full Committee Chairman Tim Scott (R-SC) to indicate whether the identities of the staffers conducting the review of the U.S. Department of the Treasury are known. He also asked Chairman Scott to indicate whether these staffers have security clearances.

Full Committee Chairman Tim Scott (R-SC):

• Chairman Scott remarked that his reference to the U.S. Department of the Treasury’s statement had been meant to clarify Sen. Mark Warner’s (D-VA) comments. He also stated that the U.S. Department of the Treasury’s actions had been very opaque during the previous Biden administration.

Sen. John Kennedy (R-LA):

• Sen. Kennedy first expressed support for DOGE’s efforts to scrutinize federal spending. He then remarked that some U.S. customers have been debanked based on their religious beliefs, their views on guns, or their involvement with fossil fuels. He asked Mr. Ring to identify which U.S. banks are engaging in discriminatory debanking practices.
  • Mr. Ring remarked that Bank of America, Chase Bank, Citibank, and KeyBank have engaged in discriminatory debanking practices. He stated however that Old Glory Bank has not engaged in such practices.
• Sen. Kennedy remarked that the Committee must hold a hearing with testimony from the executives of the banks identified by Mr. Ring.
  • Mr. Ring expressed agreement with Sen. Kennedy’s call for a hearing involving testimony from bank executives whose banks had engaged in discriminatory debanking practices.
• Sen. Kennedy asked Mr. Ring to indicate whether banks are engaging in debanking and other controversial activities to assuage the concerns of regulators or to advance the political agendas of their executives.
  • Mr. Ring stated that regulators had not pushed banks to debank conservative causes and asserted that bank executives had instead pushed these debanking activities to advance their own political agendas. He also remarked that the U.S. requires a market solution to the problem of debanking. He warned that regulating the decisions of banks to extend services to customers would have unintended consequences. He elaborated that such regulations would impose burdensome paperwork requirements on banks.
• Sen. Kennedy asked Mr. Ring to confirm that he is asserting that bank executives are imposing their political agendas on their customers through debanking decisions and that these decisions ultimately harm the bank’s shareholders.
  • Mr. Ring confirmed Sen. Kennedy’s description of his assertion.
• Sen. Kennedy asked Mr. McCauley and Mr. Gannon to indicate whether they agree with Mr. Ring’s assertion.
  • Mr. Gannon expressed his disagreement with Mr. Ring’s assertion that recent debanking activities are the result of bank executives advancing their own political agendas. He contended that regulators are responsible for recent debanking activities.
  • Mr. McCauley also contended that regulators are responsible for recent debanking activities. He stated that the major banks had wanted to service the cryptocurrency industry and that regulators had dissuaded the major banks from serving the industry.

Sen. Chris Van Hollen (D-MD):

• Sen. Van Hollen asked Mr. Ring and Mr. McCauley to indicate whether their businesses work to protect the personal information of their customers.
  • Mr. Ring answered affirmatively.
  • Mr. McCauley answered affirmatively.
• Sen. Van Hollen raised concerns over how DOGE is demanding access to highly sensitive personal information from the U.S. Department of the Treasury. He noted how the highest-ranking civil servant had resigned before turning over this information to DOGE staffers. He stated that the Committee (which has partial jurisdiction over the U.S. Department of the Treasury) should hold a hearing on DOGE’s activities at the U.S. Department of the Treasury. He further asserted that many of DOGE’s claims about the use of federal funds have been “patently false.” He then applauded the CFPB’s efforts to protect Americans from debanking. He called it ironic that many opponents of debanking are seeking to eliminate the CFPB. He also discussed how the U.S.’s lack of a real-time payments system is causing Americans to incur significant overdraft fees. He added that these overdraft fees are causing some Americans to experience debanking. He asked Mr. Klein to confirm his statements.
  • Mr. Klein expressed agreement with Sen. Van Hollen’s concerns regarding overdraft fees. He noted how a person could close a bank account in good standing and be charged fees for failing to meet a minimum balance threshold during the bank account’s final month. He commented that the person in this scenario could miss mailed notice of these fees because the person had moved homes. He stated that the former customer’s failure to pay these fees could lead the bank to charge additional late fees to their former customer and to close their bank account in bad standing. He indicated that this closure could in turn lead the bank to report the former customer to a “do not bank” list, which could deny the former customer future access to banking services.
• Sen. Van Hollen asked Mr. Klein to discuss how the Payments Modernization Act would address this problem.
  • Mr. Klein noted how the Expedited Funds Availability Act (EFAA) requires the U.S. Federal Reserve to make payments move faster as technology allows. He stated that the U.S. Federal Reserve has taken no actions since this law’s passage in 1987 to support faster payments. He noted that Americans must currently wait several days for deposited check funds to be made available. He stated that Americans can incur bank account overdrafts during the period between the date in which a check is deposited and the date in which the check’s funds become available. He remarked that the Payments Modernization Act would require the U.S. Federal Reserve to move forward on implementing a real-time payments system. He commented that this legislation would save Americans money through enabling them to avoid overdraft fees. He mentioned how the Bank of England had implemented a real-time payments system in 2008. He stated that the U.S.’s adoption of a real-time payments system in 2008 would have saved Americans $100 billion annually. He explained that a real-time payments system would reduce the need for check cashing and payday lending services, as well as reduce the incurring of overdraft fees. He contended that the Payments Modernization Act would constitute the best course of action for reducing income inequality without raising taxes or increasing government spending. He expressed frustration regarding the current length of the check clearing process.

Sen. Katie Britt (R-AL):

• Sen. Britt remarked that U.S. financial regulators had become increasingly politicized over the previous four years. She expressed frustration that the Committee had not held a hearing on debanking issues during the previous 118th Congress. She stated that the U.S. must not permit debanking to occur and asserted that banks must not be political in their activities. She expressed interest in understanding the origin of recent debanking activities and why certain industries and conservative-aligned groups have been especially susceptible to debanking. She further expressed interest in ensuring that debanking does not continue to occur within the U.S. She then mentioned how the OCC under the first Trump administration had finalized a Fair Access to Banking rule to address the issue of debanking. She asked Mr. Gannon to indicate what had happened to this rule.
  • Mr. Gannon noted how the Biden administration had immediately revoked the first Trump administration’s Fair Access to Banking rule upon President Biden taking office.
• Sen. Britt asked Mr. Gannon to indicate whether regulatory supervision of bank reputational risk is a directive from Congress or found anywhere in law.
  • Mr. Gannon noted that while Congress has directed federal bank regulators to conduct supervisory activities, he stated that bank regulators have developed their own protocols for conducting these activities.
• Sen. Britt asked Mr. Gannon to indicate whether bank reputational risk has any meaningful connection to the material safety and soundness of a bank.
  • Mr. Gannon remarked that the existing economic literature has not found a connection between reputational risk and basic elements of banking (such as capital, liquidity, and operations). He also noted how bank regulators have defined stakeholders as a source of reputational risk and commented that bank regulators themselves are stakeholders. He stated that banks are therefore in an awkward position when arguing about reputational risk with bank regulators because the bank regulators are responsible for this reputational risk.
• Sen. Britt then asked Mr. Gannon to elaborate on how management ratings of banks from bank regulators often do not reflect a bank’s management practices.
  • Mr. Gannon remarked that U.S. banks are currently very resilient and have record high levels of capital and liquidity. He highlighted how bank spending on compliance technology had increased by 60 percent between 2016 and 2024. He acknowledged that while banks remain imperfect and make mistakes, he asserted that banks have demonstrated a commitment to improving their management practices. He concluded that reputational risk does not impact bank management.
• Sen. Britt lastly asked Mr. Ring to discuss the “real world impacts” for a small legally operating business that is denied access to the U.S. financial system.
  • Mr. Ring remarked that a business cannot effectively exist if it cannot make payments or access banking services. He highlighted how cryptocurrency-related businesses, gun-related businesses, and conservative organizations have faced challenges accessing banking services.

Sen. Catherine Cortez Masto (D-NV):

• Sen. Cortez Masto first remarked that Congress should address government waste, fraud, and abuse without providing an unelected private citizen with access to the U.S. Department of the Treasury’s payment system. She emphasized that this system contains the personal information of U.S. citizens. She then remarked that most people that submit complaints to the CFPB and state attorneys general regarding the loss of a bank account typically attribute these bank account closures to overdraft fees. She highlighted how the CFPB has taken action to prevent illegal, punitive, and expensive overdraft fees. She mentioned how Navy Federal Credit Union had agreed to refund more than $80 million to military servicemembers and their families in November 2024. She added that Navy Federal Credit Union had paid a $15 million civil penalty for charging illegal and deceptive overdraft fees. She asked Mr. Klein to further discuss the problem of abusive overdraft practices.
  • Mr. Klein discussed how some unscrupulous banks and credit unions will reorder customer debit card transactions to maximize overdrafts. He noted how the state of New York had just issued a new regulation to prohibit banks from reordering customer debit card transactions. He also discussed how the U.S.’s payments system currently relies upon batch technology, which involves consolidating multiple payments into a single transaction. He stated that a key benefit of real-time payments is the ability to process payments on an individual basis. He remarked that the U.S.’s payments system’s use of batch technology raises questions as to whether a bank account’s credits or debits should be processed first. He stated that the processing order can impact a bank account’s total amount of overdraft. He highlighted how Armed Forces Bank had been able to generate $92 per customer in overdraft fees through these deceptive practices. He further remarked that these deceptive practices are especially prevalent at military bases and financial service providers that co-locate at other businesses (such as Walmart). He highlighted how 9 percent of Americans pay 80 percent of overdraft fees and commented that these Americans are very profitable customers for certain types of banks. He further remarked that many consumers experience bounced checks because of delayed payments processing. He mentioned how some banks have provided their customers with 48 hours to cure a bank account overdraft and indicated that these banks have experienced a 50 percent decrease in overdrafts. He commented that a faster payments system could address these overdraft problems. He lamented that prudential regulators over the previous four years have not taken actions to stop banks and credit unions that rely upon overdraft fees for all of their profits. He expressed frustration that these banks and credit unions are instead provided with exceptional CAMELS ratings and asserted that these financial institutions should be treated as check cashing services.

Sen. Pete Ricketts (R-NE):

• Sen. Ricketts remarked that the previous Biden administration had weaponized the federal government at all levels to advance a liberal policy agenda. He stated that this weaponization had involved the imposition of electric vehicle (EV) mandates, a lack of illegal immigration enforcement, and the targeting of religious groups. He asserted that the Biden administration’s action had undermined faith in the U.S. government. He remarked that bank regulator-pushed debanking also undermines the rule of law and contended that bank regulators should instead focus on ensuring a safe and compliant banking system. He asserted that legal businesses should not lose access to banking services based on their involvement in a legal industry (such as firearms or cryptocurrency). He stated that bank regulators in both the Obama and Biden administrations had unfairly discriminated against legal industries to reduce their access to banking services. He commented that businesses require access to the banking system in order to exist. He mentioned how he had worked in the financial services industry prior to entering Congress. He stated that the U.S. possesses the most transparent and liquid capital markets in the world because of proper regulation. He warned that inappropriate regulatory actions jeopardize the transparency and liquidity of U.S. capital markets. He asked Mr. Gannon to indicate whether bank regulators had exceeded their statutory authorities under Operation Choke Point through focusing on vague metrics and reputational risk (as opposed to safety and soundness).
  • Mr. Gannon remarked that Operation Choke Point had driven many legal small businesses out of business. He described Operation Choke Point as a “backdoor way” to make legal businesses illegal. He stated that Congress (rather than bank regulators) should determine whether businesses are legal or illegal. He asserted that bank regulators under Operation Choke Point had instead unilaterally executed their own agendas without Congressional approval. He stated that these actions had distorted the relationship between bank regulators and Congress. He commented that bank regulators should derive their power from Congress.
• Sen. Ricketts asked Mr. Gannon to indicate whether bank regulators had evaded the notice-and-comment rulemaking requirements of the Administrative Procedure Act through imposing requirements via informal guidance documents under Operation Choke Point.
  • Mr. Gannon answered affirmatively.
• Sen. Ricketts asked Mr. Gannon to posit why bank regulators had evaded these notice and comment rulemaking requirements.
  • Mr. Gannon remarked that the Administrative Procedure Act’s notice and comment rulemaking process and the Congressional Review Act bring transparency to regulatory activities. He discussed how the Administrative Procedure Act requires federal agencies to provide notice of a rulemaking, consider stakeholder comments on a rulemaking, and perform a valid cost-benefit analysis on a rulemaking. He commented that these requirements are often difficult to adhere to. He also noted how rules that have not gone through this process are not considered to have taken effect for the purposes of the Congressional Review Act.
• Sen. Ricketts asked Mr. Gannon to indicate whether bank regulators were attempting to bypass Congress and evade public scrutiny through issuing informal guidances. 
  • Mr. Gannon commented that he could not speak to the intentions of bank regulators. He stated however that the decision of bank regulators to issue informal guidances had the effect of bypassing Congress and evading public scrutiny.
• Sen. Ricketts then mentioned how the FDIC had issued Old Glory Bank a consent order. He asked Mr. Ring to indicate whether Old Glory Bank’s relationship with the FDIC has been either collaborative or combative.
  • Mr. Ring testified that Old Glory Bank’s relationship with the FDIC has recently improved. He mentioned how a former FDIC regulator with 30 years of experience at the Agency had joined Old Glory Bank as an investor and board member. He commented that this former FDIC regulator’s involvement with Old Glory Bank has helped the bank’s relationship with the FDIC. He stated however that the FDIC fosters a challenging regulatory environment for new and growing banks.
• Sen. Ricketts indicated that his question period time had expired. He remarked that regulators that maintain relationships with entities under their purview perform better based on his professional experience in the financial services industry. He elaborated that these relationships help regulators to better identify bad actors. He asserted that a hostile regulatory regime by contrast discourages good actors because these good actors cannot trust their regulators.

Sen. Andy Kim (D-NJ):

• Sen. Kim noted that while millions of SARs are filed in the U.S. annually, he stated that the usefulness of these SARs remains unclear. He asked Mr. Klein to indicate whether the usefulness of SARs remains unclear.
  • Mr. Klein answered affirmatively. He remarked that banks are judged based on the quantity of SARs filed rather than the quality of SARs filed. He stated that this situation creates an incentive for banks to file more SARs without regard to quality. He highlighted how SAR filings have increased tenfold over 20 years. He noted how research had found that the ability of SARs to lead to tax evasion prosecutions has been “extremely thin.”
• Sen. Kim noted that while banks are spending significant amounts of money and time filing SARs, he stated that banks are not receiving meaningful feedback regarding the usefulness of their filed SARs. He also asked Mr. Klein to confirm that U.S. Internal Revenue Service (IRS) prosecutors are only using a small fraction of filed SARs to support their activities.
  • Mr. Klein noted how the Cato Institute had found that 327 SARs (out of 27 million filed SARs) had been used to start tax evasion prosecutions. He stated that SARs are meant to serve as a tool for identifying criminal activities that are occurring. He asserted however that the U.S.’s current SAR system is providing a surplus of indicators, which diminishes the ability of SARs to flag criminal activities. He questioned the ability of regulators to assess the significant quantity of filed SARs. He then discussed how cannabis remains illegal at the federal level and noted that the U.S. Drug Enforcement Administration (DEA) could shut down any state-sanctioned cannabis business. He stated that SARs are not required to identify cannabis businesses and commented that cannabis businesses openly advertise their existences and locations. He questioned the rationale for requiring banks to file SARs for cannabis businesses.
• Sen. Kim remarked that the U.S.’s current SAR regime puts pressure on banks to not service cannabis businesses. He asked Mr. Klein to recommend more concrete SAR reforms.
  • Mr. Klein remarked that state-licensed cannabis businesses should be treated the same as other legal businesses within the banking system. He commented that law enforcement agencies can easily identify and locate state-licensed cannabis businesses. He also recommended that Congress clarify SAR filing priorities for banks. He stated that there exist certain areas (such as elder abuse) where SARs could require the collection of more information. He asserted that financial and bank regulators should provide a clear overview of what activities ought to be prioritized in the U.S.’s SAR filing system. He commented that the U.S. has historically only expanded the number of entities that require SAR filings.
• Sen. Kim expressed agreement with Mr. Klein’s comments. He remarked that excessive SAR requirements for banks are causing banks to more heavily consider reputational risks. He also stated that there should exist more transparency for SARs and the establishment of an appeals system for SARs. He expressed hope that the Committee could work to address these issues.

Sen. Jim Banks (R-IN):

• Sen. Banks criticized how bank regulators had treated Anchorage Digital and characterized this treatment as wrong and disruptive. He asked Mr. McCauley to indicate whether Anchorage Digital has had an opportunity to recover the losses that it had incurred because of bank regulator actions.
  • Mr. McCauley testified that Anchorage Digital had spent significant time and effort working to recover their closed bank account and stated that Anchorage Digital could not recoup losses associated with this closure. He mentioned that Anchorage Digital had filed an appeal to the OCC regarding the closure of their bank account. He noted however that the OCC could not help Anchorage Digital obtain banking services from other financial institutions.
• Sen. Banks asked Mr. McCauley to quantify the losses associated with the closure of Anchorage Digital’s bank accounts.
  • Mr. McCauley noted that Anchorage Digital had maintained a trading business that was engaged in hundreds of millions of dollars in transactions volume per month. He testified that this trading business’s transactions volume had been completely halted because Anchorage Digital could no longer accept client cash. He indicated that the loss of this business had forced Anchorage Digital to lay off some of its staff.
• Sen. Banks asked Mr. McCauley to indicate whether Anchorage Digital’s banking access challenges had ultimately impacted non-wealthy individuals.
  • Mr. McCauley noted that Anchorage Digital serves institutional investors and that many of these institutional investors create retail investment products. He mentioned how Anchorage Digital provides custody services for some cryptocurrency exchange-traded funds (ETFs), which retail investors often include in their investment portfolios.
• Sen. Banks asked Mr. McCauley to indicate whether the bank that had closed Anchorage Digital’s bank account had a financial incentive to do so.
  • Mr. McCauley answered no. He testified that many large banks had been engaged in “active conversations” with Anchorage Digital to add cryptocurrency services as an offering. He elaborated that these large banks were exploring whether to become cryptocurrency custodians themselves or to enter this business line. He asserted that these large banks had not wanted to debank Anchorage Digital and had instead wanted to embrace cryptocurrencies. He stated that these large banks had been suddenly forced to stop their own cryptocurrency activities and to close cryptocurrency-related bank accounts.
• Sen. Banks then stated that the Biden administration has often claimed that the cryptocurrency industry was a “magnet” for fraud and crime. He noted how Mr. McCauley had testified that Anchorage Digital had met the same KYC and AML standards as all other banks. He asked Mr. McCauley to indicate why the Biden administration had sought to exert excessive pressure on the cryptocurrency industry.
  • Mr. McCauley stated that he could not comment on the Biden administration’s motivations. He discussed how banks play a key role in implementing the BSA. He asserted that efforts to eliminate the cryptocurrency industry’s access to banking services were “self-defeating.” He stated that the way to foster transparency and monitoring of the cryptocurrency industry is to integrate the cryptocurrency industry into the formal banking system.
• Sen. Banks then remarked that debanking is often associated with the complete loss of access to banking services. He asked Mr. Gannon to indicate whether banks might take intermediate steps to restrict access to banking services (such as holds on transactions or investments) for certain customers.
  • Mr. Gannon stated that while banks could put holds on transactions or investments, he asserted that debanking activities are usually more “broad-based” in nature. He mentioned how he knows of a vineyard co-owner whose wife is an investor within the cannabis industry. He indicated that this vineyard and the vineyard’s various individual owners had all lost their bank accounts. He emphasized that this vineyard and its individual owners had no relationship to the cannabis industry. He lamented that bank regulators are often not precise in their targeting of bank accounts.

Sen. Raphael Warnock (D-GA):

• Sen. Warnock first requested that the Committee hold a hearing regarding Elon Musk’s “dangerous” access to the U.S. Department of the Treasury’s payments systems. He then mentioned how Silicon Valley Bank, Signature Bank, and First Republic Bank had failed nearly two years prior. He highlighted how these were three of the largest bank failures in U.S. history. He noted how a review of Signature Bank’s failure had found that the FDIC had not properly staffed the team dedicated to overseeing the Bank. He stated that bank regulators are “overstretched” and “overworked” and that banks are requesting more communication, certainty, and clarity from bank regulators. He expressed shock with the FDIC’s recent decision to withdraw job offers from more than 200 new bank examiners. He asked Mr. Klein to indicate whether the FDIC is understaffed in terms of bank examiners.
  • Mr. Klein answered affirmatively.
• Sen. Warnock asked Mr. Klein to indicate whether the FDIC’s understaffing can impact the ability of bank examiners to provide regulatory clarity to banks (especially when banks are dealing with new businesses that offer complicated or potentially risky financial products or services).
  • Mr. Klein answered affirmatively.
• Sen. Warnock asked Mr. Klein to indicate whether the Trump administration’s decision to rescind job offers to FDIC bank examiners would impede some businesses in accessing the traditional banking system.
  • Mr. Klein answered affirmatively. He asserted that the Trump administration’s hiring freeze at the FDIC is overly broad.
• Sen. Warnock expressed agreement with Mr. Klein’ assertion. He also noted how the Trump administration had encouraged current FDIC bank examiners to quit their jobs. He warned that the departures of current FDIC bank examiners would compound the FDIC’s staffing problems. He then asked Mr. Klein to identify other risks that might arise from understaffing U.S. bank regulators.
  • Mr. Klein noted how bank regulatory staff is needed to approve new bank charters. He also noted how bank regulatory staff is needed to update regulatory models (which entails data and information collection). He warned that understaffing U.S. bank regulators could slow down these activities. He also stated that the FDIC needs to mobilize in response to bank failures. He highlighted how the U.S. has already experienced several bank failures in 2025. He applauded the FDIC’s performance in responding to bank failures and stated that FDIC ensures that insured depositors have prompt access to their funds when a bank failure occurs. He commented that the FDIC’s ability to perform these activities requires trained staff. He highlighted how bank failures in smaller communities can be especially complicated to respond to. He warned that understaffing the FDIC jeopardizes the U.S.’s ability to promptly respond to bank failures.
• Sen. Warnock remarked that Mr. Klein’s comments demonstrate that understaffing bank regulators would harm U.S. businesses and innovation. He asserted that legal businesses should not be systematically excluded from the financial system. He stated that the way to ensure that legal businesses have access to the financial system is through hiring and empowering bank regulators. He commented that these regulators can ensure that banks are safe and sound and provide guidance to banks regarding permissible levels of risk. He warned that revoking job offers for FDIC bank examiners and pressuring these bank examiners to quit undermines the safety of the U.S. banking system and harms U.S. businesses.

Sen. Bill Hagerty (R-TN):

• Sen. Hagerty remarked that a “shocking number” of industries and individuals had been denied access to financial services in the U.S. over the previous four years. He mentioned how he had recently spoken with a legal Tennessee business that had been denied financial services because of reputational risk. He also noted how this legal business has been prevented from expanding its credit facility, denied insurance policies, and denied the ability to renew insurance coverage. He remarked that these problems exist at multiple levels. He stated that banks have partisan ideologues working for them that prevent banks from servicing certain disfavored industries. He also stated that external political activist groups are pressuring banks to not service certain disfavored industries. He further stated that activist shareholder proposals are seeking to pressure banks to not service disfavored industries. He commented that proxy advisory firms are enabling these activist shareholder proposals. He also stated that bank regulators have abused their supervisory authorities to pressure banks to not service disfavored industries. He commented that these bank regulators are pursuing policy agendas that Congress has not authorized. He warned that the subjective assessments of risk by bank examiners are “ripe for abuse.” He then lamented that banks are unable to publicly discuss debanking. He indicated that banks are subject to confidentiality requirements from regulators that prevent the banks from indicating their reasons for denying banking services. He commented that banks are “very concerned” about the prospect of regulatory retaliation if they discuss the topic of debanking. He raised concerns that unelected individuals are dictating which kinds of companies can exist and thrive. He commented that these unelected individuals are acting with no directive from Congress. He mentioned how FDIC Acting Chairman Travis Hill had just released 175 documents relating to the FDIC’s supervision of banks that are attempting to engage in cryptocurrency-related activities. He stated that these documents confirm that these banks had experienced “extraordinary” resistance and had received directives from their supervisors to pause, suspend, and refrain from expanding all types of cryptocurrency or blockchain technology-related activity. He asked Mr. McCauley to indicate whether the “hostile posture” of the federal government to the cryptocurrency industry had caused the U.S. to lose companies and innovators to other jurisdictions.
  • Mr. McCauley highlighted how one of the recently released FDIC documents had directly called on banks to pause all cryptocurrency-related activities. He remarked that that the FDIC’s actions had caused cryptocurrency-related activities to move outside of the U.S. to foreign jurisdictions. He commented that cryptocurrency-related businesses are moving abroad to operate in fairer regulatory environments. He called this movement “damaging” to the U.S. and asserted that the U.S. should want these cryptocurrency-related businesses. He indicated that these businesses include cryptocurrency exchanges and stablecoin businesses. He thanked Sen. Hagerty for his introduction of stablecoin legislation and called it important for the U.S. to support the development of stablecoins.
• Sen. Hagerty lamented that the U.S. is driving cryptocurrency innovation abroad. He then asked Mr. McCauley to indicate who had signed the FDIC document that he had referenced.
  • Mr. McCauley indicated that Eric Guyot (who is an assistant regional director at the FDIC) had signed the document that he had referenced.
• Sen. Hagerty emphasized that Mr. Guyot is not an elected official and criticized Mr. Guyot for seeking to restrict the cryptocurrency industry’s access to banking services. He then remarked that there exist important parts of the U.S.’s BSA and AML regime that are susceptible to weaponization for political purposes. He noted how senior public officials and their families can be designated as politically exposed persons (PEPs). He indicated that PEP designation results in higher regulatory scrutiny, which can increase the likelihood of bank account closure. He asked Mr. Gannon to address how the U.S.’s BSA and AML regime could effectively balance legitimate law enforcement concerns with the need to prevent unnecessary bank account closures.
  • Mr. Gannon remarked that the partnerships between banks and regulators could be modernized through technology-enabled data and information sharing. He commented that the U.S.’s current reliance on SARs and CTRs to identify banking risks is inefficient. He stated that the improved use of data and information would help policymakers to determine whether the reason behind an instance of debanking is risk-based or politics-based.

Sen. Ruben Gallego (D-AZ):

• Sen. Gallego noted that Mr. McCauley’s testimony had discussed how Anchorage Digital manages risks and identifies suspicious activities as required by bank regulations. He asked Mr. McCauley to indicate how often Anchorage Digital detects potentially suspicious activities amongst its clients.
  • Mr. McCauley testified that Anchorage Digital maintains active monitoring programs that look for suspicious activities. He stated that Anchorage Digital’s systems have capabilities beyond those of traditional banks. He elaborated that these systems monitor point-to-point transactions and use blockchain data to obtain a greater understanding of transactions. He noted that Anchorage Digital primarily serves institutional investor clients and commented that these clients are less prone to money laundering. He testified however that Anchorage Digital will report any detected suspicious activity to bank regulators.
• Sen. Gallego interjected to note that Anchorage Digital will file SARs when it detects suspicious activities to protect itself and its shareholders from liability. He asked Mr. McCauley to indicate whether Anchorage Digital has ever denied service to a potential client based on a risk assessment.
  • Mr. McCauley answered affirmatively. He stated that there exist use cases, activities, and systems that Anchorage Digital is poorly suited to support. He testified that Anchorage Digital will assess whether it can take on an account and handle the risks associated with said potential account.
• Sen. Gallego also commented that there exist hassles associated with a potential bank client with a poor risk assessment. He elaborated that the bank considering whether to take on such a client would need to expend time and effort confirming their ability to service the client.
  • Mr. McCauley stated that bank risk assessments of potential clients are standard operating procedure.
• Sen. Gallego remarked that U.S. policymakers should recognize that every bank and every regulator differs in terms of their risk tolerances. He then noted how Mr. Ring had testified that Old Glory Bank had been subjected to duplicative and overly burdensome regulatory requirements during its six-month approval process. He asked Mr. Ring to identify the specific regulatory requirements that had been duplicative for Old Glory Bank. He also asked Mr. Ring to provide recommendations for how Congress could address these problems while still ensuring that bank regulators maintain their risk-based approach to safety and soundness in the banking system.
  • Mr. Ring noted how Old Glory Bank had been formed through the acquisition of a $10 million bank that had held $3 million in loans. He stated that the acquisition process had taken six months, three rounds of additional information requests, 300 pages of document submissions, and an “all hands call.” He indicated that this acquisition process had involved the FDIC, the U.S. Federal Reserve, and the CFPB. He testified that he had never spoken with a regulator that was a banker. He stated that this lack of professional banking experience can impede the judgement of regulators.
• Sen. Gallego asked Mr. Ring to make specific recommendations for regulatory improvements.
  • Mr. Ring remarked that the U.S. should ensure that half of its bank regulators that are hired moving forward possess prior professional banking experience. He commented that targeting individuals with professional banking experience would ensure that bank regulators understand the impacts of their regulations. He also remarked that the bank failures in 2023 were attributable to liquidity shortages. He stated that bank regulators should be focused on assessing a bank’s loans and liquidity levels (rather than their AML policies).
• Sen. Gallego provided Mr. Klein with an opportunity to respond to Mr. Ring’s comments.
  • Mr. Klein asserted that Silicon Valley Bank had failed due to a “horrible” investment strategy and not due to a lack of liquidity.
  • Mr. Ring interjected to comment that Silicon Valley Bank’s failure had occurred following a bank run.
  • Mr. Klein stated that Silicon Valley Bank’s bank run was in response to depositors realizing that the bank lacked capital. He noted how 93 percent of Silicon Valley Bank’s deposits had been uninsured. He highlighted how Silicon Valley Bank had $250 billion in deposits and only four branches. He commented that Silicon Valley Bank had focused on technology startup companies and was not a regional bank. He expressed frustration with how the U.S. government had bailed out Silicon Valley Bank. He noted how Silicon Valley Bank’s largest depositor had been a stablecoin issuer that had held $3 billion in deposits at the bank. He highlighted how this stablecoin’s value had dropped from $1 to $0.87 during Silicon Valley Bank’s bank run. He indicated that this stablecoin’s value had subsequently returned to $1 following the U.S. government’s bailout of Silicon Valley Bank. He remarked that this episode demonstrates the connection between the banking system and the cryptocurrency industry. He then expressed agreement with Mr. Ring’s concerns regarding the relationships between banks and bank regulators. He highlighted how Silicon Valley Bank’s CEO had sat on the Board of Directors of the U.S. Federal Reserve Bank of San Francisco.
• Note: Sen. Gallego’s question period time expired here.

Sen. Bernie Moreno (R-OH):

• Sen. Moreno remarked that debanking policies are devastating U.S. entrepreneurs. He then discussed how many famous historical criminals had relied upon the fiat currencies. He commented that the problem of money laundering predates digital currencies. He then Mr. Gannon to indicate the amount of loans that a bank tends to automatically forgive.
  • Mr. Gannon stated that banks tend not to automatically forgive loans.
• Sen. Moreno remarked that former President Biden had illegally forgiven student loans. He commented that there had not been immediate demands for Congressional hearings on the Biden administration’s decision to forgive student loans. He mentioned how automotive technicians at his previous car dealership had amassed significant tool loans that had not been forgiven. He called it unfair that the U.S. had sought to forgive student loans and not tool loans for automotive technicians. He asked Mr. Gannon to indicate whether he was aware of any instances where a bank had provided loan forgiveness for non-student loans.
  • Mr. Gannon stated that he was not aware of any instances where a bank had provided loan forgiveness for non-student loans. He remarked that banks have an expectation that the loans that they make will eventually be repaid.
• Sen. Moreno then applauded how there now exists consensus that debanking had occurred.
  • Mr. Ring interjected to comment that there had previously existed disagreement regarding whether debanking had occurred.
• Sen. Moreno remarked that the Committee must now assess why debanking is occurring and who is responsible for this debanking. He then asked Mr. Ring to indicate whether a small community bank can easily compete with a larger national bank (such as J.P. Morgan Chase or Bank of America).
  • Mr. Ring stated that it is “almost impossible” for a small community bank to compete with a larger national bank. He estimated that Old Glory Bank spends 75 percent of its time serving regulators and 25 percent of its time serving customers. He commented that the small margins of community banks make it very difficult for these banks to compete with larger national banks. He noted that community banks are subject to the same regulations as their larger competitors and have fewer resources to comply with said regulations.
• Sen. Moreno commended Old Glory Bank’s efforts to support working class Americans that have been debanked. He stated that most Americans have either personally experienced mistreatment by a bank or know someone that has been mistreated by a bank. He asserted that competition would be the best solution for addressing this mistreatment.
  • Mr. Klein noted how the U.S. has almost 10,000 banks and credit unions.
• Sen. Moreno interjected to ask Mr. Klein to indicate the number of banks and credit unions that the U.S. had possessed a decade prior.
  • Mr. Klein stated that the U.S. had possessed more banks and credit unions a decade prior. He attributed this higher previous number of banks and credit unions to restrictions on the ability of banks to operate in multiple states.
• Sen. Moreno interjected to comment that competition within the banking sector has decreased “dramatically” in recent years. He lastly called the government “the most greedy organization on the planet.” He stated that the U.S. government charges taxpayers exorbitant interest and fees for late tax payments. He remarked the U.S. government is greedy because it lacks competition. He asserted that more competition in the banking sector would help address the sector’s various problems.

Sen. Angela Alsobrooks (D-MD):

• Sen. Alsobrooks remarked that the U.S. should both expand access to credit and capital for all Americans. She also stated that the U.S. should protect its financial system from criminals, fraudsters, and scammers. She asserted that both objectives are not mutually exclusive. She further called it important for the U.S. to protect the integrity of its financial system from politics. She asked Mr. McCauley and Mr. Ring to indicate whether their customers would trust their banks if the banks shared sensitive customer financial information with an outside party and without the customer’s consent.
  • Mr. McCauley answered no.
  • Mr. Ring answered no.
• Sen. Alsobrooks asked Mr. McCauley and Mr. Ring to indicate whether an unelected billionaire should be examining Social Security payments.
  • Mr. Ring commented that Sen. Alsobrooks appears to be referring to Elon Musk. He stated that Elon Musk’s efforts are attempting to save taxpayer money. He commented that the U.S. has thus far not found a better way to save taxpayer money.
• Sen. Alsobrooks asked Mr. Ring to indicate whether Old Glory Bank’s customers would accept their Social Security payments being reviewed by an outside party.
  • Mr. Ring indicated that he did not believe that Elon Musk is illegally examining Social Security payments. He stated that DOGE is studying how federal taxpayer funds are being spent.
  • Mr. McCauley remarked that Anchorage Digital’s clients would likely welcome the hiring of an external auditor to ensure that Anchorage Digital was operating in a fiscally responsible manner.
• Sen. Alsobrooks asked Mr. McCauley to indicate whether Anchorage Digital’s clients would be comfortable with a party outside of Anchorage Digital’s bank structure reviewing sensitive client information.
  • Mr. McCauley remarked that it would be important for Anchorage Digital to ensure that proper processes and procedures were being followed before the bank hired and onboarded an auditor. He also stated that Anchorage Digital would need to ensure that the auditors acted carefully when accessing sensitive information.
• Sen. Alsobrooks expressed hope that U.S. business leaders would publicly oppose DOGE’s accessing of sensitive information. She then discussed how studies have found that banks and bank regulators can better balance the need for safety and soundness with financial inclusion. She mentioned how a 2023 U.S. Department of the Treasury report had examined circumstances where financial institutions had indiscriminately ended relationships with broad categories of people to mitigate risks. She stated that this report had demonstrated that unfair debanking often results in less financial inclusion and less fairness. She also stated that this report had found that unfair debanking had ultimately pushed consumers and businesses to use more dangerous and more expensive financial products and services. She noted how this report had recommended that financial regulators promulgate rules to promote a supervisory culture that balances legitimate risk, mitigation, and strategies that support financial inclusion. She asked Mr. Klein to indicate whether financial regulators had adopted this 2023 recommendation.
  • Mr. Klein answered no. He stated that financial regulators have pushed banks to use “do not bank” lists for BSA and AML compliance. He expressed disappointment with the activities of prudential regulators. He remarked that the Bank On movement has worked to develop better fraud screening measures to expand financial inclusion. He asserted that the U.S. could improve its adoption of financial inclusion programs.
• Sen. Alsobrooks then discussed how the Community Reinvestment Act encourages banks to meet the credit needs of underbanked communities (especially low- and moderate-income neighborhoods). She noted how this law requires banking agencies to assess the records of banking institutions in meeting the credit needs of the communities that they serve. He asked Mr. Klein to indicate how supervisory debanking could make it more difficult for banks to meet their community reinvestment obligations.
  • Mr. Klein stated that many “overdraft predator” banks have received outstanding community reinvestment ratings from their regulators. He noted how these banks often rely upon overdraft fees to remain profitable.

Sen. Kevin Cramer (R-ND):

• Sen. Cramer first lamented that Committee Democrats are opposing DOGE’s efforts to identify waste, fraud, and abuse within the federal government. He asserted that more businesspeople should be reviewing the federal government’s activities. He then raised concerns over how certain legal industries are being categorically denied access to banking services. He asserted that both regulators and bank executives are responsible for discriminatory debanking practices. He stated that the environmental, social, and governance (ESG) movement in corporate America was the precursor to recent debanking activities. He expressed support for the Fair Access to Banking Act, which would prohibit banks from categorically discriminating against legal industries. He stated that many bank executives have privately indicated support for this legislation because it would absolve them of pressure to deny banking services to certain industries. He asked the witnesses to opine on this legislation.
  • Mr. Ring remarked that bank regulators have pushed for the debanking of industries while mid-level bank executives have pushed for the debanking of individuals based on politics. He raised concerns that the Fair Access to Banking Act would require banks to prove that their decisions to not extend banking services to a given customer were legal. He warned that a bank’s need to justify its decisions to deny banking services to businesses would result in significant reporting obligations for banks. He asserted that increasing the number of banks would be a better approach for ensuring sufficient access to banking services.
• Sen. Cramer asked Mr. Ring to indicate whether a bank should receive federal deposit insurance if it plans to categorically discriminate against certain industries.
  • Mr. Ring remarked that bank regulators were categorically discriminating against certain industries through their policies and guidelines. He cited FDIC FIL 16-2022 and SEC SAB 121 as examples of such discrimination. He stated that Congress should focus on holding individual regulators accountable for issuing discriminatory policies and guidances.
  • Mr. Gannon remarked that there needs to exist more transparency and more notice when debanking decisions are made. He mentioned how President Trump had recently revived EO 13892 and explained that this EO provides more due process to parties that wish to contest the actions of regulators.
• Sen. Cramer interjected to comment that Congress should codify in statute the provision of greater due process for parties that wish to contest the actions of regulators. He then indicated that his question period time had expired.

Sen. Cynthia Lummis (R-WY):

• Sen. Lummis first thanked Mr. Gannon for his work in her state of Wyoming. She then asked Mr. Gannon to define the term “reputational risk.”
  • Mr. Gannon remarked that it is difficult to define the term “reputational risk” and commented that there does not exist a real definition for this term. He stated that the term is malleable, subject to interpretation, and at the discretion of regulators. He also commented that the definition of reputational risk may change over time.
• Sen. Lummis asked Mr. Gannon to indicate whether the term “reputational risk” provides bank examiners with license to censor certain viewpoints or make regulatory decisions based on subjective assessments of what constitutes a controversial comment.
  • Mr. Gannon answered affirmatively.
• Sen. Lummis highlighted an excerpt from a confidential U.S. Federal Reserve implementation handbook on account access that states that the central bank’s staff must consider whether a person has made a “controversial comment” when making decisions about access to the payments system. He asked Mr. Gannon to confirm that access to the U.S. Federal Reserve’s payments system is a defining feature of a bank.
  • Mr. Gannon confirmed that access to the payments system is a defining feature of a bank.
• Sen. Lummis asked Mr. Gannon to indicate whether it is dangerous for the U.S. Federal Reserve to serve as “judge and jury” on a particular banker’s speech.
  • Mr. Gannon stated that he had not previously seen the except that Sen. Lummis had highlighted. He remarked that this excerpt proves that the term “reputational risk” is subjective because the adjective “controversial” is itself subjective. He also called it “chilling” that access to the U.S. Federal Reserve’s payments system could be dependent on whether an applicant had been engaged in controversial commentary or activities. He commented that these criteria are akin to the criteria used in countries that appear on U.S. Office of Foreign Assets Control (OFAC) lists. He asserted that individual comments should not be used to assess the capabilities of a financial institution seeking access to the federal banking system. He stated that such criteria could cause people to restrain their expression of views to maintain access to banking services.
  • Mr. Klein expressed agreement with Mr. Gannon’s concerns regarding the except that Sen. Lummis had highlighted. He specifically criticized the U.S. Federal Reserve Bank of Kansas City’s preclusion of certain financial institutions from accessing the payments system.
  • Mr. Gannon noted how the U.S. Federal Reserve Bank of Kansas City has argued that it has complete and unfettered discretion as to whether to permit access to the payments system as part of litigation involving Custodia Bank (which is a Wyoming financial institution).
• Sen. Lummis expressed agreement with Mr. Klein and Mr. Gannon’s concerns. She asked Mr. Gannon to define what constitutes a “controversial comment or activity” for the purposes of the U.S. Federal Reserve’s instructions.
  • Mr. Gannon remarked that he has “no idea” as to what constitutes a “controversial comment or activity” for the purposes of the U.S. Federal Reserve’s instructions.
• Sen. Lummis asked Mr. Gannon to indicate whether the definition of a “controversial comment or activity” is subject to the discretion of the regulator.
  • Mr. Gannon answered affirmatively.
• Sen. Lummis asked Mr. Ring and Mr. McCauley to define the term “controversial commentary or activity.”
  • Mr. Ring stated that the U.S. Federal Reserve likely views a “controversial commentary or activity” to include commentary or activities involving “pro-America causes and the flag.”
  • Mr. McCauley remarked that the U.S. Federal Reserve’s use of the term “controversial commentary or activity” appears to be a “tacit attempt” to restrict speech that is considered undesirable.
• Sen. Lummis remarked that the U.S. Federal Reserve’s instructions constitute “hard proof of Operation Choke Point.”

Full Committee Chairman Tim Scott (R-SC):

• Chairman Scott remarked that the Committee would hold additional future hearings on the issue of debanking.