- Trump's executive order could cost banks up to $5.6 billion and 70 million hours of paperwork.
- Millions of immigrants and unbanked individuals would face higher barriers to financial access.
- Cryptocurrencies and fintech could benefit as alternatives to stricter controls.
The US banking system is on the brink of a regulatory overhaul that could redefine the relationship between financial institutions, customers, and the state. The Trump administration is moving forward with an executive order that would require banks to collect and verify citizenship or legal immigration status data from their clients, a requirement not currently part of standard account-opening protocols. This initiative, publicly championed by Treasury Secretary Scott Bessent, has sparked intense debate over its economic, social, and technological implications, especially in a context where financial inclusion and data privacy are critical issues.
This measure redefines access to the financial system, impacting costs, privacy, and inclusion, with implications for banks, customers, and the crypto market.
The momentum behind this measure became clear during the Invest in America Forum in Washington, D.C., where Bessent stated that banks will have to comply if the Treasury and banking regulators so order. His stance is unambiguous: if authorities determine that citizenship verification is the responsibility of financial institutions, they will have no choice but to adapt. Bessent argues that the current "know your customer" (KYC) framework, which includes regulations like the Bank Secrecy Act and the USA PATRIOT Act, is insufficient because it focuses on confirming customer identity without addressing their legal status in the country. According to him, this allows "unknown foreign nationals" to open accounts without banks knowing whether they are US citizens, green card holders, or individuals with irregular immigration status.
Costs and Administrative Burden
Experts and banking industry representatives have issued stark warnings about the potential costs and administrative burden associated with this measure. Preliminary estimates suggest that verifying citizenship could add between 30 million and 70 million hours of paperwork annually, translating to financial costs ranging from $2.6 billion to $5.6 billion. These expenses would not only affect financial institutions but could also be passed on to customers through higher fees or stricter requirements, exacerbating access barriers for already marginalized communities. Moreover, there is concern that the executive order might extend to include existing bank accounts, which would exponentially multiply the scale of the process and its associated costs.
Citizenship verification could cost banks up to $5.6 billion and 70 million hours of paperwork annually.
The disproportionate impact would fall on unbanked or underbanked populations, which in the US include millions of immigrants, low-income workers, and ethnic minorities. Currently, about 5.9 million US households lack a bank account, according to FDIC data, and many more rely on alternative financial services like remittances or digital payment apps. Imposing citizenship requirements could push these individuals further into the informal economy or toward decentralized technological solutions, such as cryptocurrencies, which offer greater anonymity and fewer regulatory hurdles.
Political Context and Immigration Agenda
This initiative does not arise in isolation; it is part of a broader effort by the Trump administration to link immigration policy with information collection across various spheres of American public life. In recent months, similar efforts have been seen in areas like the Census and voting processes, reflecting a coordinated strategy to strengthen government controls over the population. Support for the measure extends beyond the executive branch, with figures like Republican Senator Tom Cotton introducing complementary bills in March to require citizenship verification in financial transactions.
Bessent's justification is based on comparisons with international practices, claiming that "every other country does it" by requiring citizenship data for banking services. However, this assertion is questionable, as there is no universal global mandate, and regulations vary significantly between nations. In countries like Germany or Japan, banks may request residency information but rarely require specific proof of citizenship. This discrepancy underscores the political nature of the proposal, rather than a regulatory need based on global standards.
Implications for the Financial System and Alternatives
Implementing this executive order could fundamentally alter the architecture of the US financial system. Banks, already burdened with regulations like KYC and anti-money laundering (AML) laws, would have to invest in new verification technologies, staff training, and compliance processes. This could slow down account openings, increase operational costs, and reduce the competitiveness of smaller institutions lacking the resources to adapt quickly. Additionally, it raises serious data privacy concerns, as collecting sensitive citizenship information could expose customers to risks of data breaches or misuse by malicious actors.
“If authorities determine that is the banks' task, then banks will have to do it.”
In contrast, the rise of fintech and cryptocurrencies offers attractive alternatives for those seeking to avoid these stricter controls. Platforms like Binance allow users to access global financial services with less invasive identification requirements, though still subject to anti-money laundering regulations. This dynamic could accelerate migration toward digital assets, especially among immigrant communities relying on fast and affordable cross-border remittances. According to recent data, cryptocurrency transaction volumes related to remittances have increased by 15% year-over-year, reflecting a growing preference for decentralized solutions.
Expert Perspectives and Market Reactions
Financial analysts and civil rights advocates have expressed skepticism about the feasibility and fairness of the measure. Organizations like the American Bankers Association have noted that the estimated costs might be conservative, and actual implementation could exceed $5.6 billion if retroactive reviews of existing accounts are included. On the other hand, immigrant advocacy groups argue that this policy could exclude millions of people from the formal banking system, perpetuating cycles of poverty and limiting access to credit and savings.
From a market perspective, regulatory uncertainty could generate volatility in the banking and financial sectors. Stocks of large banks like JPMorgan Chase and Bank of America might face short-term pressure due to anticipated costs, while fintech companies could benefit from increased demand for digital alternatives. In the cryptocurrency space, this news might be interpreted as a catalyst for greater adoption, as investors seek refuge in assets less susceptible to direct government controls.
What to Expect in the Coming Months
The executive order is currently "in process," according to Bessent, and the White House is expected to formalize it in the coming weeks. Next steps will include public consultations, legal reviews, and potential court challenges by interest groups. Banks, for their part, are already evaluating implementation strategies, which could include partnerships with digital identity verification providers or developing internal systems to handle the additional workload.
In the long term, this measure could reshape the US financial landscape, driving greater digitization and decentralization. Policymakers will need to balance national security and immigration control objectives with the need to maintain an inclusive and efficient banking system. For consumers, the key will be diversifying financial options, considering both traditional institutions and emerging alternatives in the crypto and fintech spaces.
“Markets are always looking at the future, not the present.”
— Diario Bitcoin
— TrendRadar Editorial