The Blockchain Association (BA), a cryptocurrency advocacy group, has filed more Freedom of Information Act (FOIA) requests seeking information on recently closed crypto-friendly banks in the United States. The organization announced on April 14 that it has also filed Freedom of Information Law (FOIL) requests to the Federal Housing Finance Agency (FHFA) and the New York Department of Financial Services (NYDFS) in addition to the FOIA requests previously filed.
The BA is seeking further information on the de-banking of crypto companies following the seizure of Signature Bank and the failure of Silvergate Bank. The Association reported it is investigating whether the failure of Silvergate “was the result of a politically-motivated decision by the Federal Home Loan Bank of San Francisco, which is overseen by the FHFA, to take the extraordinary and unusual action of pulling a loan made to Silvergate only months earlier.”
In early March, Silvergate’s parent company announced it would “wind down operations” for the crypto and tech-focused bank. Its peer, Silicon Valley Bank, collapsed on March 10 following a bank run, and the Treasury, Federal Reserve, and other agencies closed Signature Bank on March 12.
The Association initially filed for further information from the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency (OCC) regarding the de-banking on March 16.
On April 16, the Blockchain Association and the DeFi Education Fund filed a brief in a United States District Court over the sanctioning of Tornado Cash.
The Blockchain Association is an advocacy and lobbying group for the cryptocurrency sector, with around a hundred members that include industry executives, investors, companies, organizations, and projects. In 2022, the Association spent $1.9 million lobbying the U.S. government according to campaign finance data firm Open Secrets.
The organization’s request to the NYDFS was to “seek to understand whether the closure of Signature Bank was the result of the bank’s insolvency or a decision to send an anti-crypto message despite the bank being fully solvent.”
The de-banking of crypto companies has been an issue in the United States for several years. The term “de-banking” is used when financial institutions refuse to provide services to cryptocurrency-related companies.
The reason for the de-banking is often attributed to regulatory uncertainty, the perceived risk of money laundering, and a lack of understanding of the cryptocurrency industry.
Some financial institutions, such as Signature Bank, have been more amenable to working with cryptocurrency-related businesses. Signature Bank was reportedly one of the few banks that provide financial services to Tether and Bitfinex, two of the largest cryptocurrency exchanges in the world.
However, even banks that have supported cryptocurrency ventures have been shut down. Silvergate Bank, for instance, was a favorite among cryptocurrency companies, including Coinbase, Kraken, Gemini and Bitstamp, among others.
The de-banking has also had an impact on the cryptocurrency sector’s growth in the United States. Many companies have had to turn to foreign banks and payment processors to support their operations.
The Blockchain Association’s FOIA and FOIL requests aim to shed more light on the motivations behind the de-banking of cryptocurrency companies. The Association hopes that the information it will generate from these requests will help clarify the regulatory landscape and create more certainty for companies operating in the cryptocurrency sector.
In conclusion, the crypto sector has been struggling with the de-banking of cryptocurrency companies for some time now. The Blockchain Association’s request for more information on the closure of Silvergate Bank and Signature Bank aims to understand the motivations behind the closures and potentially shed more light on the regulatory landscape. The Association’s efforts are commendable as they will generate more transparency and create more certainty for the cryptocurrency sector, which will ultimately promote its growth.
