Most US Debanking Tied to Government Pressure, Not Banks
What Does the Cato Institute Say Is Driving Debanking?
Most debanking cases in the United States are the result of government pressure rather than decisions made independently by banks, according to a new report from the Cato Institute. The study challenges the common narrative that account closures are mainly driven by political or religious discrimination inside financial institutions.
In the report published Thursday, Cato analyst Nicholas Anthony breaks debanking into several categories. One is political or religious debanking, where accounts are closed due to belief or affiliation. Another is operational debanking, where a bank decides a relationship no longer makes business sense. The third, and most common, is government debanking, where authorities push banks to close accounts directly or indirectly.
“While media and political narratives often attribute these closures to political or religious discrimination, this study finds that the majority of debanking cases stem from governmental pressure,” Anthony wrote.
Investor Takeaway
How Does Government Debanking Actually Happen?
Anthony argues that government pressure takes two main forms. Direct action includes formal letters, enforcement notices, or court orders instructing banks to cut off certain activities or clients. Indirect pressure comes through legislation, regulatory guidance, or supervisory expectations that make entire categories of customers unattractive to serve.
One example cited in the report involves the Federal Deposit Insurance Corporation sending letters to banks telling them to halt crypto-related activity. According to Anthony, those letters did not include clear timelines or follow-up guidance. “In practice, these letters were effectively termination orders,” he wrote.
Because the instructions were open-ended, banks had strong incentives to exit relationships entirely rather than risk regulatory consequences. Anthony argues that this structure encourages banks to debank preemptively, even without explicit orders, to avoid supervisory scrutiny.
Why Has Crypto Been Hit So Hard?
Crypto firms have faced account closures and banking denials for years, long before . Many in the industry believe these actions were part of a policy-driven effort to limit the sector’s growth, particularly during the Biden administration.
Anthony’s report supports that view by showing how reputational risk rules and compliance obligations push banks to avoid industries viewed as politically sensitive. When regulators flag an activity as risky without banning it outright, banks often respond by cutting ties instead of absorbing compliance uncertainty.
Public disputes have highlighted this tension. said in December that the bank does not debank customers based on religious or political beliefs and argued that pressure comes from both major political parties. Around the identical time, several crypto executives accused large banks of closing accounts without explanation, fueling suspicion that decisions were driven by regulatory signals rather than internal policy.
Investor Takeaway
Can Congress Actually Reduce Debanking?
The report argues that executive actions alone are not enough to reverse debanking trends. While the Trump administration has issued executive orders addressing debanking and appointed more crypto-friendly leadership at agencies such as the , Anthony says lasting change must come from Congress.
He calls for reforms to the , the removal of confidentiality rules that shield regulatory pressure from public scrutiny, and the elimination of reputational risk regulation. According to Anthony, these measures would reduce incentives for banks to exit lawful businesses quietly and would expose how often government intervention influences account closures.
“If Congress wants to bring relief and reduce the debanking phenomenon, it’s time to eliminate the confidentiality that has shrouded the system,” he wrote. “It’s time to take the practice of reputational risk regulation off the table. And it’s time to reform the Bank Secrecy Act regime that has deputized financial institutions as law enforcement investigators.”
The findings arrive as crypto firms continue to search for reliable banking partners in the U.S. If Anthony’s analysis holds, the future of debanking will depend less on individual banks and more on whether lawmakers are willing to curb the tools regulators use behind closed doors.
