Cato report finds most U.S. debanking stems from direct or indirect government pressure, with crypto firms hit hard and Congress urged to reform key banking laws.

A majority of U.S. debanking cases result from direct or indirect government pressure rather than independent decisions by financial institutions, according to a new report from the Cato Institute.

Cato Institute says debanking is government driven

The study distinguishes government debanking from political, religious, or operational account closures and identifies cryptocurrency firms as among the most affected entities, with regulators using regulatory risk to discourage banks from serving the sector, the report stated.

The findings contradict common narratives that attribute account closures primarily to political or religious bias by banks, according to the research.

The report outlines several forms of debanking. Political or religious debanking involves account closures based on beliefs or affiliations. Operational debanking occurs when a bank terminates a customer relationship for business reasons. Government debanking takes place when authorities pressure banks to sever ties with certain clients.

Public records show repeated instances of officials intervening in financial markets to influence how banks manage customer relationships, either directly or indirectly, the study found.

Cryptocurrency companies feature prominently in the report. Digital asset firms have reported difficulties accessing banking services, fueling speculation that regulators have sought to curb the sector through informal pressure rather than explicit bans, according to the study.

Government debanking typically takes two forms, the report stated. Direct action includes formal letters or court orders instructing banks to terminate accounts. Indirect pressure is applied through regulation or legislation that makes certain clients too risky for banks to serve.

The report cites actions by the Federal Deposit Insurance Corporation, which sent letters urging banks to pause crypto-related activities without providing clear timelines or follow-up, effectively forcing account closures.

JPMorgan Chase CEO Jamie Dimon said in December that the bank does not close accounts based on political or religious views, while acknowledging that pressure from both major U.S. political parties has influenced banking decisions. Around the same time, Jack Mallers, CEO of Strike, said JPMorgan shut down his personal accounts without explanation. Similar claims were made by executives at ShapeShift, according to public statements.

The report argues that executive actions under President Donald Trump and leadership changes at agencies such as the Securities and Exchange Commission have addressed some concerns but fall short of a lasting solution.

The study contends that Congress holds the key to reform by amending the Bank Secrecy Act, ending reputational risk regulation, and lifting confidentiality rules that shield government pressure from public scrutiny. Congressional action would be necessary to remove the tools that allow government agencies to influence banks’ decisions, according to the report’s conclusions.