In brief

  • The Office of the Comptroller of the Currency has proposed a rule preventing national banks from discriminating against businesses based on factors other than risk.
  • This has ramifications for cryptocurrency firms and money services businesses that have trouble accessing banking services.
  • The US Treasury office is led by Brian Brooks, former Chief Legal Officer for Coinbase.

The Office of the Comptroller of the Currency (OCC), a US Treasury office led by former Coinbase executive Brian Brooks, today proposed regulatory changes that would give cryptocurrency businesses more access to banking services.

The proposed rule change would limit national banks’ ability to deny financial services services to money services businesses such as cryptocurrency firms—or any other category of business—unless they fail to meet certain quantitative, risk-based criteria.

The OCC says it’s been pushing this line for the better part of the decade:

“Consistent with the Dodd–Frank Act’s mandate of fair access to financial services and since at least 2014, the OCC has repeatedly stated that while banks are not obligated to offer any particular financial service to their customers, they must make the services they do offer available to all customers except to the extent that risk factors particular to an individual customer dictate otherwise.”

In other words, banks must apply risk assessments to individual business, not business categories

Yet, said the OCC, “Some banks continue to employ category-based risk evaluations to deny customers access to financial services.”

The OCC has compiled reports of independent ATM operators, family planning organizations, private prisons, gun sellers, and money services businesses being locked out of financial services. 

Marco Santori, Chief Legal Officer for cryptocurrency exchange Kraken, tweeted to his public account that this effectively includes crypto companies. 

“Crypto OGs know the single greatest impediment to widespread adoption has been and continues to be the lack of access to banking services,” he said. “In its early days, Bitcoin was caught up in Operation [Choke Point], and crypto more broadly is still caught up today.”

Operation Choke Point, which is mentioned in the OCC proposal, was an Obama-era Department of Justice pressure campaign to, as the OCC puts it, “to cut off access to financial services to disfavored (but not unlawful) sectors of the economy.”

While it ended in 2017, the OCC apparently has reason to believe such discrimination still occurs without government pressure. It pointed to reports from Alaska Congressional representatives claiming large US banks had stopped lending to oil and gas companies engaged in Arctic drilling, a contentious political issue but perhaps not a financially or legally risky one.

The OCC believes that this is often done based on personal policy beliefs rather than risk assessments. “In some cases,” it said, “banks appear to have denied persons access to financial services without even attempting to price the financial services to reflect the perceived risk.”

The new rule, signed by Brooks, states that OCC-covered banks shall “make each financial service it offers available to all persons in the geographic market.” Moreover, it can’t deny a financial service in order to prevent competitors such as, say, money services businesses.

While the proposed change is broad in its application, it doesn’t take much to see it as a shout-out to the cryptocurrency industry. Brooks is Coinbase’s former Chief Legal Officer and he’s spent much of his tenure as acting Comptroller of the Currency pushing changes to the way banks approach digital assets.

The letter has gone out for public comment until January 4, 2021.