FDIC Vice Chair Travis Hill Addresses Crypto Debanking, Blockchain Policy in Pivotal Speech

In a wide-ranging speech on Friday, Travis Hill, Vice Chair of the Federal Deposit Insurance Corporation (FDIC) and a potential pick for FDIC Chair under President-elect Donald Trump, tackled critical issues facing the banking industry. Among his focal points were the contentious issue of crypto debanking, the future of blockchain policy, and lessons from recent banking collapses.

Hill acknowledged that “crypto debanking” has been a significant challenge in recent years. “Over the past few years, there have been various accounts of individuals and businesses associated with the crypto industry losing access to bank accounts without explanation,” he said. Hill compared these practices to the controversial ‘Operation Choke Point’, where politically disfavored groups were systematically denied banking services.

The problem extends beyond the crypto space, he noted, affecting individuals tied to religious or political groups and others deemed controversial. Hill called for greater clarity and fairness in banking access policies, highlighting the need to ensure innovation isn’t stifled by arbitrary barriers.

Crypto Innovation Stymied by Regulatory Ambiguity

In a direct critique of the FDIC’s current stance, Hill expressed concern over the lack of clear guidance for institutions exploring digital assets and distributed ledger technology (DLT). Previously planned policy documents outlining the FDIC’s expectations were abandoned in 2022, leaving banks to navigate the agency’s requirements on a case-by-case basis.

“I have talked in the past about how damaging this approach has been, as it has stifled innovation and contributed to a public perception that the FDIC is closed for business if institutions are interested in anything related to blockchain or distributed ledger technology,” Hill remarked.

His comments follow Coinbase’s recent freedom of information request to the FDIC, which revealed a pattern of delaying or obstructing banks’ crypto-related initiatives, including participation in the USDF tokenized deposit consortium.

To address these challenges, Hill proposed a shift in regulatory strategy, emphasizing the need for upfront clarity rather than relying on case-by-case approvals or enforcement actions.

He also advocated for the revival of the FDiTech innovation lab, initially launched during the Trump administration and later disbanded. According to Hill, such an initiative could serve as a hub for hiring staff with cutting-edge tech skills and fostering innovation in the banking sector.

Beyond digital assets, Hill explored broader issues in banking oversight, citing the collapse of Silicon Valley Bank (SVB) as an example of systemic weaknesses. He emphasized the importance of balancing regulatory oversight with a focus on core financial risks, arguing that recent crises highlighted blind spots in the supervision process.

Looking Ahead

Hill’s speech signals a potential paradigm shift in the FDIC’s approach to blockchain, digital assets, and banking innovation. If he assumes the Chair role under the incoming administration, the FDIC may adopt a more crypto-friendly stance, focusing on fostering innovation while addressing systemic risks.

His remarks also reflect broader tensions in the financial industry as regulators grapple with the dual imperatives of ensuring stability and supporting technological advancement. For now, stakeholders in the crypto and banking sectors will be watching closely as Hill’s vision for reform unfolds.

Thomas Lin
UCW Newswire