Senators Skip Key Crypto Hearing as Political Divides Deepen

The goal of the session was to advance a bipartisan market structure bill, but it ended up highlighting political tensions as there was only one Democrat present. Meanwhile, the Trump administration is reportedly preparing an executive order to prevent banks from debanking crypto firms, after accusations of politically motivated discrimination known as “Operation Chokepoint 2.0.” However, the Federal Reserve announced it will no longer consider “reputational risk” in bank oversight, which was a policy that was criticized for harming crypto companies.

Low Turnout at Senate Hearing Raises Doubts

A recent US Senate hearing that was intended to explore bipartisan legislative frameworks for digital asset market structure saw very low attendance, with only five of the 11 members of the Senate Banking Committee’s digital assets subcommittee present. The hearing was chaired by Republican Senator Cynthia Lummis, and featured testimony from former regulators and industry leaders, including former CFTC Chair Rostin Behnam, Coinbase legal executive Ryan VanGrack, Multicoin Capital’s Greg Xethalis, and Wharton School’s Sarah Hammer. Lummis pointed to the scheduling of multiple competing committee meetings as a possible reason for the poor turnout but expressed concern about the lack of bipartisan engagement on digital asset legislation.

(Source: US Senate Banking Committee)

The hearing focused on the development of a Senate bill, which goal is to establish a clear market structure for digital assets, building on the recent passage of the GENIUS Act, a bipartisan stablecoin bill. Despite the earlier cooperative momentum, Lummis raised questions about the growing partisanship surrounding crypto legislation. She hinted at potential political motivations, and suggested that concerns over certain administration members’ family ties to the crypto industry might be influencing Democratic resistance.

Democratic Senator Angela Alsobrooks was the only member from her party present at the hearing, filling in for Ranking Member Ruben Gallego. Alsobrooks supported the GENIUS Act and played a role in advancing it. Meanwhile, Republican Senator Bernie Moreno echoed concerns about why crypto legislation has become such a partisan issue, although no direct references were made to President Donald Trump or specific people in the administration.

The Senate’s proposed digital asset market structure legislation complements parallel efforts in the House, where the CLARITY Act was recently moved out of committee and is expected to be put to a floor vote. While several Democrats previously voted alongside Republicans to advance the GENIUS Act, the broader debate over crypto regulation in Congress is still very much colored by political suspicion and questions of transparency.

Trump Eyes Action Against Crypto Debanking

Despite the rising political tensions, the Trump administration is reportedly considering issuing an executive order to prevent banks from cutting off services to politically disfavored industries, including cryptocurrency firms. According to a report from The Wall Street Journal, the proposed move is in response to concerns that financial institutions have been selectively denying services to crypto and tech entrepreneurs in what critics have labeled “Operation Chokepoint 2.0.” The alleged debanking campaign began under former President Joe Biden’s administration, with at least 30 technology and crypto founders reportedly affected.

Major banks like JPMorgan Chase, Citigroup, and Wells Fargo recently met with state officials in Texas and Oklahoma to address allegations of discrimination against industries like firearms manufacturing and fossil fuels. Naturally, the issue attracted a lot of bipartisan attention. 

In February, Democratic Senator Elizabeth Warren urged the Trump administration to intervene after saying that no one should be denied banking access based on political views or industry affiliation. The topic gained renewed urgency after the collapse of three crypto-friendly banks—Silicon Valley Bank, Silvergate Bank, and Signature Bank—between March 10 and 12, 2023. These closures prompted venture capitalist Nic Carter to characterize the situation as a coordinated attempt to marginalize the crypto industry, dubbing it “Operation Chokepoint 2.0.”

Despite a seemingly more supportive stance from the Trump administration, there are still some concerns from within the crypto industry. Caitlin Long, CEO of Custodia Bank, explained that the debanking trend may persist until at least 2026. She pointed out that Trump will not be able to appoint a new Federal Reserve governor until January, which could potentially limit the administration’s influence. 

Long added that if agencies like the OCC and FDIC roll back their anti-crypto stances but the Fed does not, regulatory uncertainty could continue to hamper the industry. Long’s own bank, Custodia, suffered due to these banking restrictions by losing both time and money.

Trump did, however, reaffirmed his plans to end the practice during his comments at the White House Crypto Summit on March 7.

Federal Reserve Ends Support for Crypto Debanking

Meanwhile, the US Federal Reserve announced a major policy shift by directing its supervisors to stop considering “reputational risk” in the oversight of banks. This is a big win for the cryptocurrency industry, which has long argued that the ambiguous concept of reputational risk was used to justify the debanking of crypto firms under Operation Chokepoint 2.0. 

In its statement, the Federal Reserve Board said it started reviewing its supervisory materials to remove references to reputational risk and replace them with more specific discussions focused on financial risk. The central bank also plans to train its examiners accordingly and ensure the change is consistently applied across all banks it supervises. Additionally, the Fed is working with other federal banking regulators to promote uniform practices across the regulatory landscape.

Despite this move, the Fed clarified that banks are still expected to maintain strong risk management systems and comply with all applicable laws and regulations. The change does not prevent banks from considering reputational risk in their internal risk frameworks; it simply removes the concept from supervisory guidance. The Federal Reserve defined reputational risk as the potential for damage due to negative publicity—accurate or not—that could lead to customer loss, litigation, or revenue decline.

The move drew praise from both crypto advocates and banking industry leaders. Senator Cynthia Lummis described the previous reputation risk policy as one that “assassinated American Bitcoin and digital asset businesses,” and called the reversal a win, albeit one that requires more action. Rob Nichols, CEO of the American Bankers Association, also supported the change by saying it would make bank supervision more transparent and grounded in sound financial principles rather than regulatory subjectivity.

However, not everyone welcomed the decision. Critics argued that removing reputational risk from oversight could downplay non-financial concerns that affect bank stability, weaken overall supervision, and open the door to potentially riskier practices.

This policy shift happened as part of the broader rollback of crypto restrictions by US regulators. In May, the Office of the Comptroller of the Currency confirmed that banks under its oversight are allowed to trade crypto and outsource related services. Similarly, the Federal Deposit Insurance Corporation clarified in March that banks can now engage in crypto-related activities without requiring prior approval.