Earlier this year, we looked at debanking, during the Convoy protests in Canada. The government ordered the banks to freeze the private bank accounts of protesters against the federal government’s contested COVID-19 policies. As we’ll see, debanking, in various forms — where the bank decides, for political reasons — to freeze or end accounts, is becoming a “thing” in the United States too. What really happens?
An investigation uncovered some sobering findings: The government invoked the rarely used Emergencies Act on February 14, insisting that doing so was constitutional (“Charter compliant”) and that freezing individuals’ bank accounts “did not amount to a seizure” of them. What happened afterward might give pause for thought:
The banks were essentially handed a list of names by the RCMP, as Angelina Mason, vice-president of the Canadian Bankers Association, explained to the House of Commons Finance Committee in March. If the names and transactions matched their customer records, the accounts were immediately frozen. At least 257 accounts were blocked in this way. Given the expansive manner in which the order was described, however, anyone who gave even $20 to the protest movement could have found themselves unable to access their own money, had the RCMP put them on its list.
The most unsettling aspect of this new and unprecedented financial threat is confusion about who actually wields the power.Peter Shawn Taylor, “Canada’s banks let down their customers during the Emergencies Act” at Financial Post (May 18, 2022)
Taylor, a senior editor at thinkmag C2C, sums up, “The banks suddenly became the tip of Ottawa’s spear in its shutdown of the trucker protest.”
But the most significant discovery was that, according to Angelina Mason, general counsel and vice president of the Canadian Bankers Association, the banks had also used their own “determinations” about whose accounts to freeze, apart from the list that the RCMP (Mounties) provided.. And that the “frozen” depositors would have a permanent record placed in their financial files. (Epoch Times, March 8, 2022)
Predictably, the situation resulted in panic withdrawals, especially from credit unions — they’re almost half the banking market in some provinces. But, according to the testimony of their Association president, the CUs were not given information at the same time as Canada’s Big Six banks were, so they didn’t even know what to tell depositors (Epoch Times, March 18, 2022).
If you think crypto like Bitcoin is the answer for the debanked, crypto watcher Jonathan Bartlett noted at the time, “most people, even crypto miners, don’t do their ordinary transactions directly on the blockchain, but rather through exchanges such as Coinbase, Kucoin, crypto.com, Etoro, and others. These institutions can be easily regulated and directed just like banks, and offer none of the protections that are at least theoretically available when accessing the blockchain directly” (Mind Matters News, February 21, 2022). Anyway, the crypto exchanges found themselves in the same position as banks and credit unions..
We can take away one key point: Banks proved quite willing to co-operate with and exceed government demands for debanking.
The trend, well advanced in the United States, is encountering pushback
Access to banking is essential in modern American commerce for all kinds of businesses. Debanking is obviously problematic for businesses that are targeted, but if left unchecked it could also become destructive to markets and investors more broadly. Investors need to know that legal businesses will be allowed to operate to the best of their abilities within the law. When banks refuse services because of public perception or the outcry of activists, investors are left unsure of the future.Ellen R. Wald, “Debanking Hurts Everyone” at Barron’s (January 8, 2021)
Well, that was prophetic on Wald’s part: In Canada, one result of mass government-led debanking was “Five of Canada’s largest banks mysteriously went offline this week after the government announced it was freezing assets of people supporting the Freedom Convoy, sparking rumors of a bank run or computer hacking.” (FEE, February 19, 2022) The demand for U.S. dollars more than tripled. It suddenly no longer mattered that Canadian banks were considered, in principle, among the safest in the world…
Politically motivated debanking is already a “thing” in the United States, Wald reports, without the government even demanding it:
In 2019, JP Morgan Chase stopped providing services to private prisons after protests were held in front of CEO Jamie Dimon’s home. The bank claimed its action was the result of evaluating the “costs and benefits” of the serving the industry. Several banks and payment processing firms, including PayPal, Citibank, and Bank of America, have cut ties with gun manufacturers and related firms. Most recently, Bank of America joined five other major American banks to say it will not fund any oil and gas efforts in the Arctic National Wildlife Refuge, even though the federal government has opened it to exploration and production. The bank described its decision as codifying an existing practice.Ellen R. Wald, “Debanking Hurts Everyone” at Barron’s (January 8, 2021)
However, pushback may be starting. After PayPal froze the Moms for Liberty account in July, it abruptly unfroze the funds after Florida governor Ron DeSantis announced an initiative against “woke banking” at their conference July 15.
Bankers might well end up wishing they had just stayed out of politics. Perhaps, given the Canadian experience, they’d be wise to demand protection from it instead.
You may also wish to read:
PayPal pioneer: The Ways Big Tech is strangling our freedoms. The conveniences offered come at a price: We can be much more easily surveilled and controlled. And yes, they ARE doing it. Sacks’s story is sobering. Pressure from above (U. S. Senate) and below (employee Twitter mobs) drive Cancel Culture and users fail so far to mount a response.
No-buy lists are the Next Big Thing after debanking. When a big online financial service like PayPal works closely with government to monitor citizens, it is violating its founding ideals. Former PayPal COO David Sacks talks about the vice grip that big fintechs like PayPal can exert against the freedom of users to dissent from state policy.