Marc Andreessen is right about de-banking

Article author: nic carterArticle translation: Block unicorn

Venture capitalist Marc Andreessen appeared on Joe Rogan's podcast and made some explosive remarks, claiming that there is a systematic "de-banking" of politically unpopular companies and individuals, especially in the crypto industry. At the beginning of the video, he pointed to the Consumer Financial Protection Bureau (CFPB), which was led by Elizabeth Warren, as the culprit for the de-banking of crypto startups. However, some critics have countered that not only has this "de-banking" not happened, but the actual goal of the CFPB is to end this phenomenon.

The problem is that there are several different issues involved here that need to be discussed. First, what is Marc Andreessen complaining about, and are his concerns justified? Second, what role, if any, has the CFPB played in the process of debanking — has it been an instigator or a deterrent?

Many on the left are not aware of the concerns about debanking in the crypto industry and on the right in general, and are therefore confused or incredulous about Mark’s comments and Elon’s repost on social platform X. First, I think it’s worth reading Mark and Joe’s conversation in full, as many people react based on snippets only, and this is actually an in-depth commentary with many independent points. Next, let’s dig in.

What is Marc Andreessen complaining about?

Mark makes a few clear and interrelated points on the show. He begins by criticizing the Consumer Financial Protection Bureau (CFPB) as an “independent” federal agency with little oversight that is able to “intimidate financial institutions and block new competition, and new startups that try to compete with the big banks.”

He then mentioned debanking as a specific harm, which he defined as "when you as an individual or your company is completely removed from the banking system." Mark pointed out that this phenomenon occurs through banks as agents (similar to the censorship implemented by the government through big tech companies), but in an indirect way, thereby exempting the government from direct responsibility.

According to Mark, debanking "has been happening to all crypto entrepreneurs for the past four years. It's also happening to many fintech entrepreneurs, and anyone who tries to start any new banking service, because they (the government) try to protect the big banks." In addition to this, Mark mentioned some politically unpopular businesses - legal marijuana, escort businesses, and gun stores and manufacturing during the Obama administration. This was called "Operation Choke Point" (proposed by the Obama administration's Department of Justice). And "Operation Choke Point 2.0" (named by the crypto industry) targets "political enemies" of the government as well as those "unpopular tech startups." Mark added, "It's had a huge impact on the tech sector. We've had about 30 founders go bankrupt in the last four years."

The victims "basically all crypto founders, every crypto startup, have either been debanked by individuals and forced out of the industry, or their companies have been debanked and can't continue to operate, or they've been sued by the SEC or threatened with charges."

Mark also mentioned that he has learned that some people have had their banking services deprived for "holding wrong political views or making unacceptable remarks."

To summarize, Mark makes the following claim:

• Debanking means that a person or company is deprived of banking services, either because your industry is politically unpopular or because you hold a different political opinion    

• The CFPB is at least partially responsible, as are other unnamed federal agencies

• This is accomplished by having regulators outsource financial repression to banks, which insulates the government from direct responsibility.

• The main victims of debanking during the Obama administration were legal but unpopular industries - marijuana companies, adult businesses, gun stores and gun manufacturers

• Crypto companies and entrepreneurs and fintech companies are the main victims of debanking under the Biden administration. Conservatives are also sometimes debanked simply because of their political views

• 30 tech entrepreneurs in the a16z portfolio have experienced debanking.

We will evaluate these views at the end of the article.

What do critics say about Marc Andreessen's remarks? I’m simplifying, but left-liberals are upset with Marc Andreessen’s comments because they think he’s using the narrative of debanking to suit his own ends (supporting cryptocurrencies and fintech) while ignoring the more “legitimate” victims of debanking — like Palestinians getting kicked off GoFundme for funding Gaza. As for the mainstream left, they’re usually outright supporters of debanking their political enemies, so they’d rather ignore the whole thing. But there is a segment of the left that is at least ideologically aligned and skeptical of corporate and state power over speech and finance. (This segment is probably growing now that the right has regained control of some tech platforms and has regained state power.) They’ve been fighting against debanking. They recognize that while right-wing dissidents have been the main victims of debanking (think Kanye, Alex Jones, Nick Fuentes, etc.), the left could just as easily have suffered if the situation was reversed. Their definition of debanking is much narrower: “Debanking, or as some financial institutions prefer to say, de-risking, is when banks cut ties with customers who are deemed politically incorrect, extreme, dangerous, or out of bounds.” (From this TFP article). In this article, Upa Subramanya mentions that banks have the power to completely ruin a person’s financial life if they deem that person a reputational risk and unable to do business. Individuals on both the left and the right have been affected – Melania Trump, Mike Lindell, Trump himself, Christian charities, January 6 participants, Muslim crowdfunding organizations and charities, etc.

However, many on the left remain critical or confused by Anderson’s comments, especially regarding the Consumer Financial Protection Bureau. Here are a few examples:

Lee Fang: The CFPB has been strongly against debanking, why does Anderson say this? Where is the evidence? One thing that wasn't mentioned in this long article is that the CFPB had investigated Anderson-backed startups for suspected fraud, not political speech. Debanking comes from the FBI and the Department of Homeland Security (DHS), not the CFPB.

Lee Fang: Debanking is indeed a big problem. We've seen truck drivers who oppose mandatory vaccines lose bank accounts due to protests, pro-Palestinian organizations lose access to Venmo accounts, and so on. But now, predatory lenders and scammers are conflating consumer protection with "debanking" and calling for deregulation.

Jarod Facundo: I really don't understand what @pmarca is talking about because just a few months ago at a FedSoc event, CFPB Director Chopra warned the audience that Wall Street was being "debanked" without giving any explanation.

Jon Schweppe: I agree with @dorajfacundo. Have absolutely no idea what @pmarca is talking about. The CFPB has been leading the charge against discriminatory debanking. What does that even mean?

Ryan Grim: The CFPB issued a legally good rule targeting banks for debanking people based on political views. Yes, a populist left-wing CFPB head is standing up for conservative rights. Now, VCs and Musk, who don’t like the CFPB for other reasons, are lying, stirring up emotions, and undermining the CFPB.

This group is hostile to crypto and fintech in general, and doesn’t consider companies in these industries to be victims of “debanking,” at least not morally equivalent to crowdfunding platforms sending money to Gaza. According to the left-wing libertarians, crypto workers are “getting what they deserve.” They argue that crypto workers are issuing tokens, scamming, and committing fraud, and therefore they deserve the disdain of banks. “If crypto founders are being unbanked, that’s a problem for bank regulation, not our battle.”

Moreover, according to these critics, Mark’s mistake is to pin the blame on the Consumer Financial Protection Bureau. The CFPB, they tell us, is an agency that fights “unbanking.” Mark is only upset with the CFPB because he has invested in fintech platforms, and the CFPB is responsible for ensuring that they don’t defraud their customers.

Since Mark’s appearance on the Rogan show, dozens of tech and cryptocurrency founders have spoken out about their experiences of being unilaterally deprived of bank access. Many in the cryptocurrency industry see the light at the end of the tunnel and believe that the unconstitutional attack on the cryptocurrency space by banking regulators through banks is nearing its end. Calls for an investigation into “Operation Stranglehold 2.0” are growing louder. So who is right? Anderson or his critics? Is the CFPB really guilty? Is debanking as serious as Mark says? Let's start our investigation with the CFPB.

What is the CFPB?

The Consumer Financial Protection Bureau (CFPB) is an "independent" agency established in 2011 by the Dodd-Frank Act in the aftermath of the financial crisis. It has broad powers and is authorized to oversee banks, credit card companies, fintech companies, loan sharks, debt collection agencies, and student loan companies. As an independent agency, it is funded outside of Congress (and therefore not subject to congressional funding scrutiny). The president cannot easily remove the director, it can directly make rules, and it can initiate enforcement and legal actions in its own name. It has considerable power. The CFPB was essentially established at the sole request of Senator Elizabeth Warren.

The CFPB is often targeted by conservatives and libertarians because it is yet another federal agency, and a largely unaccountable one at that. It was set up by Elizabeth Warren, who is often targeted by the right, to effectively harass fintech companies and banks. Of course, most of these companies are already heavily regulated. Banks must be subject to state or federal (OCC) oversight, and if they are public companies, they must also answer to the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Securities and Exchange Commission. Credit unions, mortgage lenders, etc. all have their own regulators. Prior to the creation of the CFPB, federal financial regulation was not sorely lacking. The United States has more financial regulators than any other country in the world. So it is understandable that conservatives would question why Elizabeth Warren, seemingly motivated by pure revenge, was able to obtain such a captive agency that she can use at will to harass her political opponents.

Now on to the CFPB's duties.

As for the Consumer Financial Protection Bureau (CFPB)’s role, it does have some specific regulations that generally oppose discrimination in access to banks. In particular, the Equal Credit Opportunity Act (ECOA) and the “fraudulent, unfair, or abusive practices” section (UDAAP) of the Dodd-Frank Act are the relevant legal framework. ECOA prohibits discrimination based on certain protected classes, including race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

In terms of the “stranglehold” issue that Marc Anderson mentioned, these regulations do not apply. Under the law, “cryptopreneurs” or “conservatives” are not protected classes. Therefore, this part of the CFPB’s role does not theoretically address the issue we are discussing: the political targeting of specific unpopular industries. Moreover, this regulation applies to credit access, not banking in general.

The UDAAP section of the Dodd-Frank Act is another regulation that may be relevant to debanking. It gives the CFPB broad authority to pursue practices they deem to be unfair, deceptive, or abusive. Their massive settlement with Wells Fargo fell under UDAAP. In theory, if the CFPB were to take action against unbanking, they would do so under UDAAP. But so far, it’s been more noise than action.

What the CFPB is doing

Recently, the CFPB finalized a rule that brings digital wallets and payment apps under its regulatory umbrella, making them more like banks. The rule requires large digital payment apps like Cash App, PayPal, Apple Pay, and Google Wallet to provide transparent explanations for account closures. They specifically mentioned “unbanking” in their rule release. Keep in mind that this rule does not apply to banks, but rather to “big tech companies” or p2p payment apps. Anyway, as of now, this rule has not actually been enforced, so we still need to see how it is implemented in the real world.

Will this rule curb something like "Stranglehold 2.0"? Hardly. First, it covers the actions of tech companies, not banks. Second, stranglehold-style actions are not optional actions at the bank level, but rather the result of federal regulators clamping down on entire industries through banks. For example, if the CFPB noticed that cryptocurrency startups were being systematically cut off from banking, they would have to fight the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) (and ultimately the White House) to end the practice. Given Elizabeth Warren's staunch anti-crypto sentiment, one can't help but wonder if the CFPB would do so. More importantly, the problem with strangleholds has to do with bank regulators overstepping the legal boundaries to debank entire industries. It has nothing to do with malfeasance by individual banks (which are simply reluctantly carrying out the regulators' orders).

Under UDAAP, the CFPB could, in theory, review systematic account closures targeting an industry (such as cryptocurrency). But this recent payment app rulemaking does not apply to banks, and some of Marc Andreessen’s critics cite this rule as evidence of the CFPB’s opposition to debanking. Moreover, the CFPB has been silent on debanking so far in its actual enforcement actions.

What are the main enforcement actions of the CFPB?

I did not find any CFPB settlements related to “debanking.” Here are the 30 largest CFPB settlements, sorted by dollar amount:

The closest or related case I could find was the 2023 Citibank case, which exposed their discrimination against Armenian Americans in credit card applications. (The bank ostensibly did this because California’s Armenian community had seen higher fraud rates, largely due to fraud rings.) Citibank paid a $25.9 million fine for the move.

In 2020, the CFPB found that Townestone Financial discouraged African Americans from applying for mortgages in its marketing. The company paid a $105,000 fine.

Both nationality and race are considered protected groups under U.S. law, so neither case is about pure political redlining, as critics of crypto debanking complain.

In addition, I looked at 50 recent CFPB settlements since March 2016, and none of them involved arbitrary deprivation of access to banking services. Of the 50 recent cases, 15 involved UDAAP violations (like the infamous Wells Fargo case), 8 involved fair lending violations, 5 involved student loan servicing, and 5 involved fraud. 10 cases were related to inaccurate credit reporting, 5 were related to mortgage servicing, 4 were related to auto loan discrimination, and 3 were related to illegal overdraft practices. Debanking: None.

What is the substance to Mark’s criticism of crypto/fintech companies and conservatives being debanked?

On this point, there is no real ambiguity. I have documented in detail the phenomenon known as Operation Stranglehold 2.0, where the Biden administration has revived the practice of financial redlining begun by the Obama administration, which began around 2013. At the time, Obama’s Department of Justice launched Operation Stranglehold, an official DOJ program to target legal but politically unpopular industries such as loan sharks, marijuana, adult services, and gun manufacturers through the banking industry. Iain Murray’s article Operation Stranglehold: What It Is and Why It Matters has a good discussion of this. Under Marty Gruenberg, Obama’s Federal Deposit Insurance Corporation (FDIC) used innuendo and threats to convince banks to “redline” companies in more than a dozen industries. Conservatives were unhappy with this, and members of the House of Representatives, led by Representative Luetkemeyer, exposed the practice. Critics considered the practice unconstitutional because it involved covert regulation through persuasion, rather than official rulemaking or legislation.

In 2014, a Department of Justice memo on the practice was leaked, and the House Oversight and Government Reform Committee released a key staff memo on the practice. The FDIC issued new guidance to banks, encouraging them to assess risk on a case-by-case basis rather than redlining entire industries. In August 2017, Trump’s Justice Department officially ended the practice. In 2020, Trump’s Comptroller General Brian Brooks issued the “Fair Access” rule, which was intended to end de-banking based on reputational risk.

However, in May 2021, Biden’s Acting Comptroller General Michael Hsu rescinded the rule. In early 2023, after the FTX debacle, crypto industry insiders, myself included, noticed that similar strangulation tactics were being used against crypto founders and companies. In March 2023, I published “Strangulation 2.0 is Underway and Crypto is Being Targeted,” followed by another article in May detailing new findings.

Specifically, I discovered that the Federal Deposit Insurance Corporation (FDIC) and other financial regulators had secretly imposed a 15% cap on bank deposits for crypto-related companies. In addition, I argued that crypto-focused banks Silvergate and Signature were unjustly forced into bankruptcy or closure due to anti-crypto sentiment by the government. Since then, crypto companies have struggled to obtain banking services—despite the fact that there are no official public statutes mandating that banks restrict banking operations to crypto companies, nor any legislation to that effect. Law firm Cooper and Kirk has again accused Strangulation 2.0 of being unconstitutional.

Recently, as the cryptocurrency industry remains shackled to this secretive regulation, I revisited the practice and found new evidence that Silvergate Bank was executed, not died a natural death.

Today, crypto-focused banks still have a 15% deposit cap, which is stifling the industry's growth. Every US crypto entrepreneur has suffered from this - I can attest that it has happened to about 80 of our portfolio companies. My firm, Castle Island, a general venture capital fund that only handles fiat currencies, has also experienced the sudden closure of some of its bank accounts.

After Mark's appearance on the Rogan show, many crypto executives have also spoken out. David Marcus explains how Facebook's Libra project was killed by Janet Yellen. Kraken CEO Jesse Powell, Joey Krug, Gemini CEO Cameron Winklevoss, Visa's Terry Angelos, and Coinfund's Jake Brukhman also shared their stories. Caitlin Long has long fought against Operation Stranglehold 2.0, even starting her own bank, Custodia, which had its master account stripped by the Fed. Critics may not be sympathetic to the crypto industry, but the fact is that it is a perfectly legal industry that has been suppressed by secret letters and innuendos from bank regulators. As a result, the United States has launched a broad crackdown on crypto banking, an act that was not implemented through legislation or rulemaking in the democratic process, but entirely through administrative agencies.

Beyond cryptocurrencies, similar actions against fintech are quietly unfolding. According to research by Klaros Group, a quarter of FDIC enforcement actions since the beginning of 2023 have targeted banks that work with fintech companies (compared with only 1.8% of banks that do not work with fintech). . As an investor in the fintech space, I can attest that finding banking partners for fintech companies has become a huge challenge, comparable to the difficulties cryptocurrency companies face in obtaining banking services. The Wall Street Journal criticized the constitutionality of the FDIC's actions, saying that the agency "effectively conducted rulemaking while bypassing the notice and public comment period required by the Administrative Procedure Act."

As for Anderson's comments about conservatives being disconnected from their bank accounts, we have ample anecdotal evidence that this is happening. Melania Trump mentioned in her recent memoir that she was disconnected from her bank account. The same thing happened to right-wing speech platform Gab.ai. In 2021, JPMorgan Chase cancelled the bank account of General Michael Flynn, citing reputational risk. In 2020, Bank of America cancelled the account of Christian nonprofit Timothy II International Program, and in 2023 froze the account of Christian missionary Lance Varnau. In the UK, Nigel Farage caused a minor scandal when his bank account was cancelled by Coutts/NatWest Bank. These are just a few of many examples. Under current law, US banks can close accounts for any reason, without giving an explanation. So, in essence, Anderson is correct.

Why do critics try to limit the discussion of "debanking"?

What the critics have in common is that Anderson has somehow co-opted the term "debanking" to advance his own economic agenda. Writer Lee Fang said:

“There’s a lot of talk about debanking. We’ve seen truckers opposing mandatory vaccines lose their bank accounts for protesting, pro-Palestinian groups lose access to Venmo, and so on. But now predatory lenders and scammers are conflating consumer protection with ‘debanking’ and calling for deregulation.”

The Axios writer implied that Anderson was concerned about the CFPB because his firm had invested in shady new banks like Synapse, which collapsed earlier this year. It’s become a common theme in the comments that Anderson only cares about “debanking” because he wants to deregulate the cryptocurrency and fintech industries and get rid of the CFPB’s attempts to protect customers.

It rings true, so it resonates with a lot of people on the left who don’t want to believe that the government would unlawfully debank an entire industry. Unfortunately, it does ring true for them. The Obama administration did develop strategies to use bank regulation to unconstitutionally crack down on industries like gun manufacturing and loan sharking. The Biden administration has refined those strategies again and used them very effectively in the cryptocurrency space. They are now going after fintech companies by harassing their partner banks. These things did happen, and in both cases they were broad (and unconstitutional) overuses of executive power that will now be exposed and undone under Trump.

Whether or not a writer like Fang thinks the Biden administration’s strategy to deprive crypto companies of banking services mitigates his own moral point about debanking sympathetic groups is irrelevant. It happened, it’s debanking, and it’s illegal. It’s also not that important whether Mark has some financial motivation to criticize the CFPB. (I checked, and the CFPB has not taken any enforcement actions against a16z’s investment companies to date). Bank regulators (Mark does mention multiple agencies, not just the CFPB) did use the highly regulated financial system to achieve political ends. Whether the motivations of the messengers are pure is irrelevant. The key is whether federal agencies dangerously abused executive power and went far beyond the scope of their authority to harass a legitimate industry. In fact, they did.

Ruling on Anderson's Charges

So, based on the full analysis, let's evaluate Mark's remarks at the Logan Conference:

• Debanking means that a person or company is deprived of banking services, either because your industry is politically unpopular or because you hold dissenting political views 

In my opinion, this is an accurate description. Being "debanked" does not make a difference based on whether the victim is sympathetic in your eyes.

• The CFPB is at least partially responsible, as are various other unnamed federal agencies

The CFPB does habitually harass fintechs and banks, and it probably doesn’t need to exist. But based on what we know about Operation Stranglehold 2.0, they don’t bear primary responsibility. More directly involved are the FDIC, the OCC, the Fed, and there is coordination from the Biden administration. Contrary to what critics say, the CFBP is not really a mitigating force, as they haven’t brought any cases against “debanking” so far, despite some noise about it recently.

• The way debanking works is for regulators to outsource financial repression to banks so that the government isn’t directly responsible

That’s an accurate description. Just like using big tech to censor dissidents, using banks or fintech platforms to kick out tech founders is an effective way to financially silence regime enemies without much scrutiny.

• Under Obama, the main victims of debanking were legal but unpopular industries—marijuana companies, adult stores, gun stores, and gun manufacturers

This is an accurate description of how Operation Stranglehold (an official Obama-era Justice Department program) worked. It actually started with loan sharking, but Mark doesn’t mention that.

• Under Biden, cryptocurrency companies and entrepreneurs and fintech companies are the main victims of debanking. Conservatives are also sometimes debanked for their political views

These claims are all true, though we have more evidence of a concerted crackdown on crypto than the anti-fintech movement (though we know the FDIC is holding fintechs accountable through enforcement actions against partner banks). Regarding the debanking of conservatives, we have plenty of anecdotal evidence that this is happening, but there is no evidence that banks have an existing internal policy. It seems to be done on a case-by-case basis, with “reputational risk” as the reason. The bottom line is that banks are completely opaque and they don’t need to provide justification for debanking decisions.

• 30 Tech Founders in the a16z Portfolio Have Been Debanked

It’s possible, and very likely. a16z is a very active crypto investment house, and nearly every crypto startup in the country has faced banking issues at some point.   

Where does Marc get it wrong?

• He overstates the role of the CFPB a bit, as their sister regulators the FDIC, OCC, and the Fed are more responsible for the recent flurry of crackdowns on crypto and fintech companies. However, he does point out that other unnamed “agencies” are behind debanking (although he doesn’t mention the FDIC, OCC, or Fed). Also, on the CFPB side, Elizabeth Warren is the founder of the agency and she is the one most responsible for the stranglehold (especially under the Biden administration, where it has been led by her appointee to the National Economic Council, Bharat Ramamurthy). So I can understand Marc assigning a disproportionate amount of responsibility to the CFPB.  

• His discussion of Politically Exposed Persons (PEPs) is somewhat simplistic. Being classified as a PEP does not automatically result in losing banking services, but it does generally subject you to more due diligence. Mark may be referencing the Nigel Farage/Coutts/Natwest incident, when Nigel was considered a PEP, and this was indeed a factor in his being unbanked by Coutts.

In general, Mark is right, and the critics are wrong. The CFPB has not yet become any kind of strong anti-debanking force. Debanking is real, it explicitly applies to the crypto and fintech sectors, and more evidence will emerge as Republican control arrives and investigations unfold.