Proof of Operation Chokepoint 2.0

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As a researcher with over two decades of experience in the financial sector, I can’t help but be alarmed by the revelation of Operation Chokepoint 2.0. The documents released by Coinbase shed light on a coordinated effort to de-bank crypto that was long suspected but lacked substantial evidence. This is reminiscent of my early days in the industry, where I witnessed similar tactics used against industries deemed ‘undesirable’ by the powers that be.

So, now we know. Operation Chokepoint 2.0 was real.

There was indeed a coordinated effort by the federal government to discontinue banking services for cryptocurrencies following the failure of three crypto-friendly banks (Signature, Silvergate, and Silicon Valley Bank) in March 2023. This suspicion has long been held by the crypto industry, particularly vocalized by venture capital commentator Nic Carter. However, until recently, there was little concrete evidence to support this claim. This week, internal communications from the Federal Deposit Insurance Corporation were made public following a lawsuit filed by Coinbase against a research firm (History Associates Inc.) that had been hired by Coinbase to uncover these documents. The documents, heavily redacted, suggest that the banking regulator has been actively discouraging lenders from offering or considering products and services in the digital assets sector, as reported today by Jesse Hamilton of CoinDesk.

The FDIC has politely requested a halt on all operations involving cryptocurrencies, as stated in one of 23 letters sent by Coinbase. At a later time, they will inform banks under their supervision about the regulatory expectations for crypto activities. Despite recent allegations, the FDIC and other regulators have consistently denied pressuring struggling banks to cease services for cryptocurrency companies, which were already facing difficulties following the fall of FTX and others in late 2022.

As a crypto investor, I can personally attest to the evidence presented in those letters. They reveal that this wasn’t just a baseless theory or random speculation, but a deliberate strategy. The FDIC had a clear plan and executed it without hesitation, aiming to restrict banking services for a legitimate American industry. This fact should serve as a significant concern for everyone.

Debanking has been a hot issue recently, after mega-VC Marc Andreessen discussed Operation Chokepoint 2.0 on Joe Rogan’s podcast. The House Committee on Financial Services heard testimony from several crypto leaders this week attesting to difficulties gaining banking services. The heavily redacted letters show FDIC demanding onerous compliance information while being unclear as to what was actually required of the banks before they could approve the provision of financial services to the businesses. Hamilton writes that some letters show the “agency wasn’t yet sure what regulatory filings would even be required before it could green-light crypto business.”

Grewal said Coinbase will petition the court to allow the documents to be released unredacted.

Beyond causing harm to the cryptocurrency sector, critics contend that access to financial services is a basic human right, and the federal government should not have the power to de facto ban lawful enterprises. Operation Chokepoint 2.0 is a term used to describe an official policy initiated during the Obama Administration aimed at limiting financial services for payday lenders, firearm vendors, and other businesses deemed undesirable.

It’s become evident that the issue of de-banking has been equally significant for cryptocurrencies as it has been for adult content, suggesting a notable stance by the current administration regarding this topic.

The opinions presented in this article belong solely to the author; they may not correspond with those held by CoinDesk, Inc., its proprietors, or its associates.

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2024-12-06 23:00