Trump Team Proposes Overhauling FDIC and Banking Regulators

President-elect Donald Trump’s transition team is reportedly considering reforms to the US banking regulatory framework following industry concerns about potential risks to cryptocurrency and digital assets.

The proposal includes the potential consolidation or elimination of key agencies such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). These discussions align with Trump’s broader agenda to reduce government size and regulatory oversight.

Trump Advisers Want FDIC Disbanded

Wall Street Journal (WSJ) reported that during interviews with prospective nominees for leadership positions, Trump’s advisers have inquired about the feasibility of abolishing the FDIC. Specifically, the Trump team’s considerations include restructuring the primary federal bank regulators — the FDIC, OCC, and the Federal Reserve—potentially merging them to streamline oversight.

Further, they suggest integrating the FDIC’s deposit insurance functions into the Treasury Department. This approach reflects recommendations from policy documents like Project 2025, developed by the Heritage Foundation and former Trump officials. Then, they advocated for consolidating these agencies to enhance efficiency.

Nevertheless, such actions would necessitate congressional approval and could face substantial resistance from both lawmakers and industry stakeholders. Secure deposits are vital, and any threat to this assurance can lead to depositor anxiety and destabilize the banking system. Against this backdrop, there is concern that altering or eliminating the FDIC could undermine confidence in deposit insurance, a cornerstone of financial stability.

“This is so bad. FDR created the FDIC amid The Great Depression to restore faith in American banking. People were losing everything when their banks failed. The FDIC was meant to prevent so-called ‘bank runs’ where people would pull their money out to save what they could get,” Walker Bragman lamented.

Notwithstanding, bank executives have reportedly expressed optimism regarding potential deregulation under the incoming administration. They anticipate relief from stringent capital requirements and consumer protection mandates.

Representative Andy Barr, a Republican from Kentucky and a Trump ally on the House Financial Services Committee, reportedly supports the plan to eliminate or drastically alter the Consumer Financial Protection Bureau (CFPB). According to WSJ, he aims to move away from “one-size-fits-all” regulations for banks.

Crypto Executives Campaign against Unfair Banking Regulation

Meanwhile, the crypto industry is closely monitoring these developments, particularly in light of concerns over “Operation Choke Point 2.0.” The term describes alleged government efforts to de-bank crypto businesses by pressuring financial institutions to sever ties with them.

Industry leaders have claimed that numerous tech and crypto founders have been denied banking services in recent years. They attribute this to a covert campaign by the current administration.

David Sacks, appointed as Trump’s “Crypto Czar,” is expected to address these de-banking practices. This effort aligns with a broader initiative to create a more inclusive financial environment for cryptocurrency enterprises. The crypto community is optimistic that the incoming administration will take a more supportive approach toward digital assets, including reversing policies viewed as unfavorable.

Adding to the controversy, Coinbase uncovered FDIC communications advising banks to limit their crypto-related services. Coinbase obtained letters through Freedom of Information Act requests.

These letters indicated that the FDIC had asked nearly two dozen banks to pause crypto-related activities in 2022. This adds credence to claims of a coordinated effort to restrict the crypto industry’s access to banking services.

In a related legal development, a Washington D.C. District Court judge rebuked the FDIC for redacting information in letters sent to Coinbase. The court emphasized the need for transparency in regulatory communications. This judicial reprimand reflects the importance of openness in the relationship between regulators and the entities they oversee.

As the Trump administration prepares to take office, analysts hope that the financial sector is poised for potential shifts in regulatory policies. While some stakeholders welcome the prospect of reduced oversight, others caution against changes that could compromise financial stability and consumer protections.