Cato Report: Regulators Behind Most Account Closures

Crypto News Regulation

Cato Report: Regulators, Not Banks, Behind Most Account Closures

Written by Aaron S.,

Editor-In-Chief

Last Updated: January 12, 2026

Key Takeaways

A Cato Institute analysis finds that most US account closures stem from regulatory pressure, not banks' independent decisions;
Government agencies like the FDIC often influence closures through vague directives, which leaves customers little room to respond;
The report urges lawmakers to ease secrecy laws, limit “reputational risk” rules, and reform the Bank Secrecy Act to improve transparency.

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Cato Report: Regulators, Not Banks, Behind Most Account Closures

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A Cato Institute analysis, released on January 8, shows that most financial account closures across the US are driven by directives or recommendations from regulatory bodies, rather than decisions made solely by banks.

Analyst Nicholas Anthony studies various circumstances behind account terminations and identifies four categories: operational reasons, religious grounds, political factors, and pressure from government entities.

According to the findings, the last category, situations where regulators intervene directly or indirectly, makes up the majority of cases.

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Agencies such as the FDIC are mentioned in the report for issuing formal letters urging banks to step back from certain activities, including those tied to cryptocurrency.

Operational justifications are also discussed, including situations in which banks cut off customers for practical or business-related reasons. In contrast, very few closures appear linked to clients' religious or political affiliations, with the data showing they are less frequent than those linked to authority influence.

The analysis notes that directives from government agencies can sometimes be vague. Often, these communications do not lay out specific actions or deadlines, which makes it difficult for affected customers to respond or appeal the decisions.

The report advises that improvements should come from lawmakers. Three main recommendations include making the Bank Secrecy Act less restrictive, eliminating laws that conceal the details of communication between regulators and banks, and removing "reputational risk" guidance that leads banks to end relationships for unclear reasons.

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