Debanked: when a bank decides your business is too risky, and the case for P2P money

The letter is usually short. Your account will be closed in 30 days. No explanation is required, and none is given.

For a lawful business, that letter can be close to fatal. Payroll, supplier payments, card processing and credit all run through a bank, and finding a new one is hard when the last one has quietly decided you are a risk.

A quiet power with loud consequences

Banks have always chosen their customers, and they should be free to manage real risks such as fraud and unpaid loans. The concern behind recent federal action is different: that whole categories of lawful activity came to be treated as too risky to serve, often under the vague heading of reputation risk.

Reputation risk is a slippery idea. It does not measure whether a customer is breaking the law or failing to repay.

It measures whether a bank might be embarrassed. And embarrassment is in the eye of whoever happens to be doing the judging that year.

The result, critics argue, is a system where a lawful firm can do everything right and still lose access, with no hearing and no appeal. That is an odd outcome in a country built on due process.

Washington takes notice

On August 7, 2025, the President signed an executive order titled "Guaranteeing Fair Banking for All Americans." It told federal bank regulators to remove reputation risk from their supervision and to act against politicized or unlawful debanking, including of lawful businesses that banks disfavor.

It also directed the Treasury to develop a strategy against debanking. That is a serious statement of principle: access to the financial system should depend on conduct, not on politics or fashion.

Whatever one thinks of governing by executive order, that principle deserves support from people of every party.

But an executive order is a direction to regulators, not a guarantee to customers. Banks still make their own decisions, and a business cut off today cannot wait for policy to work its way through the system.

Custody is the real issue

Debanking exposes a deeper problem. When someone else holds your money, someone else decides when you can use it.

Crypto does not escape this automatically. Customers of Celsius and Voyager Digital in July 2022, and of FTX that November, found that a crypto company holding their funds could freeze them as completely as any bank, and without the deposit insurance that covers bank accounts.

This is not a new lesson. Mt. Gox, once the leading bitcoin exchange, collapsed in 2014, and LocalBitcoins, an early peer-to-peer marketplace, shut down in February 2023.

Paxful users were given one month to withdraw their balances before it closed on November 1, 2025. Replacing one gatekeeper with another is not freedom; removing the need for a gatekeeper is.

What peer-to-peer escrow changes

Peer-to-peer trading goes back to an old idea: two people agree on a price and deal directly. The modern twist is the smart contract, a program on a blockchain that holds the seller's coins in escrow during a trade and releases them when the seller confirms the buyer's payment arrived.

On non-custodial marketplaces such as senpero.com, users connect their own wallets, and funds stay there until a trade is opened. Vendors set their own rates, limits and payment methods, from bank transfers to cash or local options.

In practice, a buyer picks an offer, the seller's coins lock into the contract, and the buyer pays by the agreed method. The seller releases the coins once the money shows in their own account, and if the two disagree, a dispute process reviews the evidence.

Between trades, there is no pool of customer balances sitting with a company. Your money is in your own hands, which is exactly where many debanked owners would have wanted it.

Other routes exist too. Large exchanges run their own peer-to-peer desks, and bitcoin-only tools take decentralized approaches; each comes with its own trade-offs on custody, cost and convenience.

The limits, stated plainly

Advocates do the cause no favors by overselling it. So here are the limits, without the sales pitch.

• Fraud is real. The FBI's Internet Crime Complaint Center recorded about $11.4 billion in crypto-related losses in 2025, up 22% on 2024. In peer-to-peer trading, fake payment proofs and reversed bank transfers are common tricks, because bank payments can often be recalled while crypto transfers cannot.
• Prices move. Bitcoin and most other tokens are volatile. Stablecoins aim to hold $1, but they are not bank deposits.
• Taxes still apply. The IRS treats crypto as property, so selling or swapping can trigger capital gains. Custodial brokers now report sales on Form 1099-DA.
• Banks still watch. Frequent transfers linked to crypto trading can prompt questions from your own bank, the very relationship you were trying to protect.
• Escrow is not a cure-all. It cannot help someone who agrees to deal off-platform, or who releases coins on the strength of a fake screenshot.
• Self-custody is responsibility. Lose your recovery phrase and nobody can restore your funds.

A prudent approach

1. Keep a traditional bank relationship where you can, and document your business well enough to answer questions quickly.
2. Open a second account at a different institution before you need it.
3. If an account is closed, ask in writing for the reason and keep every reply on file.
4. If you hold crypto, hold the keys yourself and store the recovery phrase offline.
5. When trading peer-to-peer, use escrow, keep every step on the platform, and release coins only after money has settled in your own account.
6. Keep clean records for the IRS from day one.

Fair banking rules are worth defending. So is the ability to hold and move your own property without asking permission, and a free people should not have to choose between the two.

-- Bradley Coleman writes on Social Media, Tech, Health and Wellness issues.