Last week entrepreneur and venture capitalist Marc Andreessen visited the Joe Rogan Experience podcast to talk about how debanking has plagued people involved with both cryptocurrency and the broader tech industry. The discussion, and the follow up on X, pretty much went viral over Thanksgiving weekend.

Debanking isn’t exactly new, and it refers to someone having their bank account closed for political reasons. But this most recent round, often referred to as Operation Choke Point 2.0, has made it difficult for crypto-related companies to maintain banking services, a problem that has kept the industry largely on the fringe of the financial system.

The source of the debanking is the scary part: Federal regulators.

Specifically, federal regulators have been pressuring banks to steer clear of customers involved in crypto. It’s generally not the case that anyone has done anything illegal, nor is it the case that regulators explicitly ask a bank to terminate a specific customer’s account. Instead, the regulators let banks know that they will view them unfavorably if they do business with certain types of customers. And that’s really all it takes.

As Andreessen discussed, one of the reasons federal officials use to justify this pressure is that crypto companies do not comply with federal anti-money laundering laws, the ones imposed by the Bank Secrecy Act of 1970. The BSA requires, among other things, banks to collect a great deal of personal information on their customers. (There are various layers involved, and they’re often grouped under the heading of “Know Your Customer” rules).

And if a bank regulator thinks a bank is failing to comply with those laws, even by association with certain customers who are guilty of no crime, that’s a problem the bank can’t have.

Bigger Than the Bank Secrecy Act

But the source of this debanking problem goes well beyond the BSA/KYC/AML rules. In fact, federal regulators justified the original Operation Choke Point based mainly on protecting banks’ safety and soundness and reputation risk.

For those who don’t recall, Operation Choke Point was launched during the Obama administration in 2013. The name comes from federal regulators’ efforts to pressure banks to “choke off” access to banking services by merchants and industries the administration didn’t like. Specifically, regulators pressured banks to stop doing business with several types of companies, including payday lenders, small dollar loan companies, and ammunition and gun sellers.

To be extra clear: This operation consisted of federal bureaucrats taking it upon themselves to shut legal businesses out of the banking system.

Thanks largely to the efforts of Rep. Blaine Luetkemeyer (R‑Mo.), who helped lead a multi-year effort to shut the program down, documents were unsealed in 2020 that revealed some of the highest ranking officials at the Federal Deposit Insurance Corporation helped orchestrate the program. Those documents also revealed how easy it was—and still is—for federal banking regulators to pull off this kind of debanking effort.

Operation Choke Point Predates 2013

The federal regulatory framework gives regulators enormous discretion. In fact, they have so much discretion that they have the authority to warn banks about dealing with certain types of customers for almost any reason they choose to justify. And any kind of warning from the FDIC, for example, is enough to get someone debanked.

Operation Choke Point may have been formalized in 2013, but regulators have been pressuring banks for decades. Both the FDIC and the Office of the Comptroller had forced banks to close customer accounts based on concerns over reputational risks dating to at least 2003, long before Operation Choke Point.

Reputational risk is vague enough, but there’s more. The FDIC can terminate a bank’s deposit insurance if it finds that the bank is engaging in “unsafe or unsound practices.” And if the FDIC hints to a banker that engaging with certain customers amounts to unsafe or unsound practices, guess what’s going to happen?

The 2010 Dodd-Frank Act also gave the Fed the authority to impose special regulations “to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions.” The law does not, however, define financial stability or distress. That’s up to the regulators. And these are just three examples—there are many more.

This broad discretion has stark implications for future debanking efforts, and some activists are already pressuring the Fed and the FDIC to use their authority to freeze oil companies out of the banking sector in the name of stopping climate change. The only surprising fact is that we’ve only reached two versions of Operation Choke Point.

Bipartisan Solutions are Needed

Many people are hopeful that the Trump administration will end Operation Choke Point 2.0 and regulators will end their outward hostility to crypto firms. But history has already proven that the problem is much bigger than any one industry and hoping for the “right” administration to be in power is far from a solution.

Rep. Ritchie Torres (D‑NY) is right—there is essentially “no real limitation on the ability of banking regulators to de-bank law-abiding citizens and businesses without due process of law.” Regulators’ broad discretion is an “insidious threat to civil liberties,” and it is one that “transcends partisanship.”

The only way to stop this kind of debanking in the future is for Congress to pare back the discretion it has given to the regulatory agencies. And neither party can do that on its own.