Sen. Warren takes a stand on crypto debanking and criticizes banks for closing accounts as issue heats up in Washington

U.S. lawmakers hashed out different approaches to debanking, as the issue over whether the crypto industry has been shut out by banks heats up in Washington.

Republicans have been leading the charge of concerns around crypto debanking, especially over the last several weeks with calls for investigations and hearings set by Republican leadership to dig into the issue.

A hearing on Wednesday in the Senate Banking Committee titled "Investigating the Real Impacts of Debanking in America" set the tone of concerns around debanking in crypto and generally.

"It is incredibly alarming and disheartening to hear stories about financial institutions cutting off services to digital asset firms, political figures and conservative-aligned businesses and individuals," said Senate Banking Committee Chair Tim Scott (R-S.C.) during the hearing.

The issue around crypto debanking has come into the spotlight on Capitol Hill over the past few months amid those calls for investigations and increased criticism from crypto firms who say they face challenges when looking to establish and maintain accounts in the U.S. Another hearing covering the topic is slated for Thursday afternoon in the House Financial Services Committee.

Sen. Elizabeth Warren (D-Mass.), who has often been critical of crypto, noted debanking among minority groups, cannabis businesses and others who have lost bank accounts for unclear reasons. Warren also seemed to find some common ground with the digital asset industry.

"I don't think for a second that you should be locked out of our banking system," Warren told Nathan McCauley, CEO and co-founder of Anchorage Digital, who was testifying at the hearing, and said during his written testimony that the firm had been debunked. Anchorage Digital is an institutional crypto platform and federally chartered crypto bank.

"In many cases, it is wrong for banks to close accounts and threaten your ability to make payroll or pay rent on time without even providing an explanation so long as you are following the law," Warren added.

Warren noted the Consumer Financial Protection Bureau, which she proposed in 2007, has been working to combat debanking for years. The CFPB caught the ire of the Trump administration amid calls from billionaire Elon Musk, head of the newly created Department of Government Efficiency (named in an apparent nod to Musk's favorite cryptocurrency, DOGE), to " delete CFPB ."

"If the President is serious about stopping debanking, then he needs the CFPB as his partner to get this done," Warren said.

A flurry of documents

Meanwhile, the Federal Deposit Insurance Corporation released 175 documents on Wednesday morning tied to how the agency supervised crypto-related activity.

"The documents that we are releasing today show that requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend or refrain from expanding all crypto- or blockchain-related activity," said FDIC Acting Chairman Travis Hill in a statement .

Hill was previously the vice chair of the FDIC and has said the FDIC should be clearer in how banks work with crypto.

Coinbase sued the FDIC, through consultant firm History Associates, accusing the agency of trying to cut off the crypto industry from the banking sector. The lawsuit also requested the FDIC's "pause letters."

The FDIC began issuing "pause letters" between March 2022 and May 2023 to some financial institutions asking them to not expand crypto-related activities and to provide more information, according to a 2023 report from FDIC's Office of Inspector General. That office is tasked with evaluating the FDIC.

"We were right," said Coinbase Chief Legal Officer Paul Grewal on Wednesday in a post on X.  "The previous @FDICgov leadership lied to us all.  There were many, many more pause letters."