tl;dr: yes, lots of legal businesses get debanked; no, he disagrees with some of the crypto advocates’ characterization of the situation
in more detail:
you can lose bank account access, despite doing nothing unethical, for mundane business/credit-risk related reasons like “you are using your checking account as a small business bank account and transferring a lot of money in and out” or “you are a serial victim of identity theft”.
this is encouraged by banking regulators but fundamentally banks would do something like this regardless.
FINCEN, the US treasury’s anti-money-laundering arm, shuts down a lot of innocent businesses that do some kind of financial activity (like buying and selling gift cards) without proper KYC/AML controls. A lot of bodegas get shut down.
this is 100% a gov’t-created issue and it’s kind of tragic.
FDIC, which guarantees bank deposits in the event of a bank run, is also tasked with making rules against banks doing things that might lead to bank runs.
You know what might cause a run on a bank? A bunch of crypto-holders suddenly finding out their assets are worthless or gone, and wanting to cash out. To some extent, FDIC’s statutory mandate does entitle it to tell banks not to serve the crypto sector too heavily, because crypto is risky.
Another thing the FDIC is entitled to do is regulate banking products to ensure that consumers are not misled into thinking their money is in an FDIC-insured institution when it isn’t. Under that mandate, a lot of crypto-based consumer banking/trading products have gotten shut down.
This does amount to “FDIC doesn’t like crypto”, but it is in fact FDIC’s job to regulate banking in ways related to preventing consumers from losing their savings. Patrick McKenzie is fine with this; given the picture he presents, if you are not fine with this, it basically means you’re not fine with the existence of the FDIC. (Which is not an unheard-of position; it belongs in the same category as objecting to other New Deal innovations like going off the gold standard and creating the welfare state.)
Separately, In the Obama administration, Operation Chokepoint happened. the FDIC claimed that a wide variety of politically disfavored businesses (guns, pornography, fireworks, etc) were risky...because of the regulatory risk of FDIC disapproving of them.
unlike the crypto regulation, this is totally unrelated to things like bank run risk that are in FDIC’s official mandate. It is simply using FDIC to punish businesses that someone in the government doesn’t like. Patrick McKenzie considers it a “lawless” abuse of power.
The Fed & Treasury’s refusal to allow Facebook to issue the Libra cryptocurrency was similarly politically motivated. Senators blamed Facebook (and the Cambridge Analytica scandal) for Trump’s election and warned the CEOs of Visa, MasterCard, and Stripe not to engage with Libra. Patrick McKenzie also views this as the “naked exercise of power.”
Politically motivated debanking of individuals is clearly possible—it happened in Canada with the truckers’ convoy. However, Patrick McKenzie does not think it is routine in the US today. It is a risk rather than a common reality.
However, he wants to insist that the “crypto agenda” of “crypto should be treated on an equal playing field with USD by the banking sector” is not going to protect ordinary people from getting debanked for being, say, bodega owners or gun enthusiasts or conservatives or pornographers. He views it as a crypto-specific lobbying agenda, pretty much separate from the civil-rights/authoritarianism issue of political debanking.
Another interesting part from the “debanking” article:
[Sam Bankman-Fried] orchestrated a sequential privilege escalation attack on the system that is the United States of America, via consummate skill at understanding how power works, really works, in the United States. They rooted trusted institutions and used each additional domino’s weight against the next. A full recounting of the political strategy alone could easily fill a book. [...] One major reason why crypto has experienced what feels like performative outrage from Democrats since 2022 is that they are trying to demonstrate that crypto did not successfully buy them.
links 12/10/24: https://roamresearch.com/#/app/srcpublic/page/12-10-2024
https://hedy.org/hedy Hedy, an educational Python variant that works in multiple languages and has tutorials starting from zero
https://www.bitsaboutmoney.com/archive/debanking-and-debunking/ Patrick McKenzie on “debanking”
tl;dr: yes, lots of legal businesses get debanked; no, he disagrees with some of the crypto advocates’ characterization of the situation
in more detail:
you can lose bank account access, despite doing nothing unethical, for mundane business/credit-risk related reasons like “you are using your checking account as a small business bank account and transferring a lot of money in and out” or “you are a serial victim of identity theft”.
this is encouraged by banking regulators but fundamentally banks would do something like this regardless.
FINCEN, the US treasury’s anti-money-laundering arm, shuts down a lot of innocent businesses that do some kind of financial activity (like buying and selling gift cards) without proper KYC/AML controls. A lot of bodegas get shut down.
this is 100% a gov’t-created issue and it’s kind of tragic.
FDIC, which guarantees bank deposits in the event of a bank run, is also tasked with making rules against banks doing things that might lead to bank runs.
You know what might cause a run on a bank? A bunch of crypto-holders suddenly finding out their assets are worthless or gone, and wanting to cash out. To some extent, FDIC’s statutory mandate does entitle it to tell banks not to serve the crypto sector too heavily, because crypto is risky.
Another thing the FDIC is entitled to do is regulate banking products to ensure that consumers are not misled into thinking their money is in an FDIC-insured institution when it isn’t. Under that mandate, a lot of crypto-based consumer banking/trading products have gotten shut down.
This does amount to “FDIC doesn’t like crypto”, but it is in fact FDIC’s job to regulate banking in ways related to preventing consumers from losing their savings. Patrick McKenzie is fine with this; given the picture he presents, if you are not fine with this, it basically means you’re not fine with the existence of the FDIC. (Which is not an unheard-of position; it belongs in the same category as objecting to other New Deal innovations like going off the gold standard and creating the welfare state.)
Separately, In the Obama administration, Operation Chokepoint happened. the FDIC claimed that a wide variety of politically disfavored businesses (guns, pornography, fireworks, etc) were risky...because of the regulatory risk of FDIC disapproving of them.
unlike the crypto regulation, this is totally unrelated to things like bank run risk that are in FDIC’s official mandate. It is simply using FDIC to punish businesses that someone in the government doesn’t like. Patrick McKenzie considers it a “lawless” abuse of power.
The Fed & Treasury’s refusal to allow Facebook to issue the Libra cryptocurrency was similarly politically motivated. Senators blamed Facebook (and the Cambridge Analytica scandal) for Trump’s election and warned the CEOs of Visa, MasterCard, and Stripe not to engage with Libra. Patrick McKenzie also views this as the “naked exercise of power.”
Politically motivated debanking of individuals is clearly possible—it happened in Canada with the truckers’ convoy. However, Patrick McKenzie does not think it is routine in the US today. It is a risk rather than a common reality.
However, he wants to insist that the “crypto agenda” of “crypto should be treated on an equal playing field with USD by the banking sector” is not going to protect ordinary people from getting debanked for being, say, bodega owners or gun enthusiasts or conservatives or pornographers. He views it as a crypto-specific lobbying agenda, pretty much separate from the civil-rights/authoritarianism issue of political debanking.
https://austinvernon.site/blog/datacenterpv.html Austin Vernon’s outline of how off-grid, solar-powered datacenters could work and be cost-effective
Another interesting part from the “debanking” article:
This is talking about dem voters or generally progressive citizens, not dem politicians, correct?
Nope, politicians. SBF donated tons of money to Democrats (and a smaller ton of money to Republicans, just to be sure).