- The U.S OCC has proposed a rule that will stop banks from denying services to businesses based on their sector, including crypto.
- Banks will now have to judge a crypto business based on the licensing requirements in the state it operates in, the OCC has stated.
A U.S financial services regulator is seeking to finally deny banks and other financial institutions the right to deny businesses service based on their sector of operation. A new proposed rule will finally see banks judge cryptocurrency businesses based on licensing and compliance merits. This step could be a big success for the crypto market in terms of a further rising adoption.
Fair Access to Banking Services
The Office of the Comptroller of the Currency announced the new proposed rule in a press release recently. The regulator, led by the pro-crypto Acting Comptroller Brian Brooks, believes the new rule will “ensure fair access to banking services provided by national banks, federal savings associations, and federal branches and agencies of foreign bank organizations.”
In its announcement, the OCC reiterated that banks must provide access to services and capital based on the risk assessment of individual customers. The watchdog warned banks against relying on broad-based decisions that affect whole categories or classes of customers. Brooks stated:
Fair access to financial services, credit, and capital are essential to our economy. This proposed rule would ensure that banks meet their responsibility to provide their services fairly since they enjoy special privilege and powers because if the system fails to provide fairness to all, it cannot be a source of strength for any.
The OCC believes that the proposed rule, once it becomes law, will build upon the principle of nondiscrimination. It will prevent banks from ganging up to limit access to services for some sectors. The rule will require banks to judge their clients based on their ability to pay, creditworthiness and other impartial, risk-based reasons.
Reprieve for Bitcoin businesses
One of the victims of this broad-based denial of service has been Bitcoin companies, in what has come to be known as “Operation Chokepoint.” The industry has seen many firms lose out on insurance coverage, banking services, loan facilities and other basic financial needs for years now.
One of the cases that caught public attention was in March last year and it involved the largest bank in the U.S, JP Morgan. The bank abruptly shut down the bank account of Cryptoraves, a blockchain startup targeting the social media industry. Despite the startup’s efforts and repeated visits to the bank, JP Morgan stuck to its decision. As Cryptoraves revealed on a blog post, JP Morgan claimed the startup was operating in a “prohibited industry.”
The OCC is out to ensure this doesn’t happen again. Speaking to the media, Brooks stated that the banking industry is falling victim to political weaponization. He stated further outlines:
There is a creeping politicization of the banking industry that has the potential to be very dangerous.
The banking industry has been especially biased against digital currencies, Brooks went on. This is despite some like JP Morgan being engaged in a digital currency project: the JPM Coin. The bank has also been developing its Quorum blockchain for years now. Brooks told one outlet:
There is no place within the United States where crypto is illegal, but there are different licensing requirements for companies involved with businesses so obviously if a bank was banking one of those businesses, one of the things that bank would look at as part of its diligence is whether that exchange or other business had the relevant approvals in that state.
Members of the public are encouraged to submit their views on the proposed rule on or before January 4, 2021.