Senator Tim Scott Proposes Bill To End Debanking Practices

According to Cointelegraph, South Carolina Senator Tim Scott, who leads the US Senate Banking Committee, is set to introduce a bill on March 6 aimed at ending regulatory oversight of customer reputational risks for banks. This move seeks to eliminate the controversial practice known as 'debanking.' Debanking occurs when banks opt not to engage with clients deemed to pose reputational risks. The Federal Reserve describes reputational risk as the potential for negative publicity about an institution's business practices to lead to a decline in its customer base, costly litigation, or revenue losses. The proposed bill has garnered support from at least 11 Republican lawmakers who are co-sponsoring it. Additionally, various banking industry groups, including the Bank Policy Institute, are expected to endorse the legislation. JPMorgan Chase, the largest bank in the United States, has also expressed its support for the bill. Over the past two decades, debanking has reportedly impacted companies across several industries, such as firearms, federal prison contractors, cannabis, and cryptocurrency. In recent years, the practice has become a focal point, with cryptocurrency advocates alleging a campaign to debank legitimate crypto companies in the United States. In February 2025, Senators Kevin Cramer and John Kennedy introduced a similar bill to ensure fair access to financial services and promote safe banking practices. The American Civil Liberties Union, a progressive organization, has also opposed debanking, highlighting the issue's bipartisan nature. In November 2024, Marc Andreessen, co-founder of Andreessen Horowitz, claimed that over 30 technology and crypto founders had been denied banking services in the US, fueling the debate over the alleged 'Operation Chokepoint 2.0' by the Biden administration. In February 2025, the GOP, now in power, held congressional hearings on the matter, revealing party-line tensions but a consensus that debanking should be abolished. Despite this, it remains uncertain whether 'Operation Chokepoint 2.0' is a genuine issue or merely political rhetoric. During a congressional hearing on February 5, Senator Elizabeth Warren stated that banks should not debank individuals based on beliefs or illegitimate reasons, emphasizing the need to halt such practices. At ETHDenver on February 28, Custodia Bank’s Caitlin Long remarked that there has been no change in US crypto banking under U.S. President Donald Trump's administration, noting that federal banking agencies have not overturned any anti-crypto guidance.