Debanking, or the sudden loss of banking services by law-abiding individuals or entities, has become a prominent issue in the cryptocurrency industry. It occurs without any apparent investigation or due process, leaving the affected parties with insufficient time to move their funds. Debanking is distinct from situations where banking services are lost due to fraud, money laundering, or other illegal activities.
The reasons for debanking vary, including combating payment processor fraud and preventing high-risk businesses from operating due to potential money laundering links. Some believe debanking can be used as a tool by political actors to discriminate against specific industries without due process.
In the United States, debanking has been associated with the now-defunct “Operation Choke Point,” which targeted certain businesses as part of a policy initiative. While the program was shut down in 2014, the phrase “Operation Choke Point 2.0” is sometimes used to describe similar tactics against political enemies or unpopular tech startups.
There are concerns that debanking can have unintended consequences, such as hindering consumer choice and stifling innovation. Many describe the practice of debanking as “un-American” due to its potential to penalize legitimate businesses and individuals.
While data on the extent of debanking is limited, at least 30 cases have been witnessed within the crypto industry over the past four years.
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