Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs
Detailing the Biden Admin's coordinated, ongoing effort across virtually every US financial regulator to deny crypto firms access to banking services"For crypto firms, obtaining access to the onshore banking system has always been a challenge. Even today, crypto startups struggle mightily to get banks, and only a handful of boutiques serve them.
This is why stablecoins like Tether found popularity early on: to facilitate fiat settlement where the rails of traditional banking were unavailable.
However, in recent weeks, the intensity of efforts to ringfence the entire crypto space and isolate it from the traditional banking system have ratcheted up significantly. Specifically,
the Biden administration is now executing what appears to be a coordinated plan that spans multiple agencies to discourage banks from dealing with crypto firms.
It applies to both traditional banks who would serve crypto clients, and crypto-first firms aiming to get bank charters. It includes the administration itself, influential members of Congress, the Fed, the FDIC, the OCC, and the DoJ.
In sum,
banks taking deposits from crypto clients, issuing stablecoins, engaging in crypto custody, or seeking to hold crypto as principal have faced nothing short of an onslaught from regulators in recent weeks.
Time and again, using the expression “safety and soundness,” they’ve made it clear that for a bank, touching public blockchains in any way is considered unacceptably riskyBeginning in 2013, Choke Point was a scheme which sought to marginalize specific industries operating legally — not through lawmaking, but by applying pressure via the banking sector.
The Obama DoJ had already cut its teeth with its successful effort to sideline the online poker space in 2011 and 2012 with threats issued to banks supporting poker companies. With Choke Point, the Department decided to scale up its efforts and target other industries, starting with uncontroversial targets like payday lenders.
Then, the DoJ coordinated with the FDIC and OCC to pressure member banks to “redline” — determine as too risky to do business with — certain legal but politically disfavored sectors, chief among them firearms manufacturers and adult entertainment. Banks and payment processors internalized this guidance, and even after the program was formally shuttered under Trump in 2017, its shadow lingered.
Today, banks simply ascribe a higher risk to activities that they suspect might draw the government’s ire, even if no specific guidance exists.
In 2017, Trump and Republican lawmakers like Rep. Luetkemeyer were able to put a stop to Choke Point for a time, but it didn’t last. One of the first moves from Biden’s OCC was to undo Brian Brook’s Fair Access rule that prohibited political discrimination in banking. Biden’s deputies picked up where Obama’s regulators had left off. And now, after the time it took to digest Biden’s Executive Orders, regulators are tightening the screw.
In some key respects, Crypto Choke Point 2.0 differs from the original. It appears that the administration has learned from the efforts of its predecessors.
In Choke Point 1.0, guidance was mainly informal and involved backdoor, off-the-record conversations. Its main tool was the threat of investigation from the DoJ and FDIC if financial institutions didn’t internalize the administration’s risk standards. Because this was patently unconstitutional, it gave Republicans the collateral to ultimately repeal the program.
In 2.0, everything is happening in plain sight, in the form of rulemaking, written guidance, and blogs. The current crypto crackdown is being sold as a “safety and soundness” issue for banks, and not merely a reputational risk issue. Jake Chervinsky of the Blockchain Association calls it “
regulation by blog post.” No need to ask Congress for new laws if federal regulators can simply make policy by publishing guidance which dissuades banks from doing business with crypto."
--------------------------------------------------------------------1) Do you think similar policies will expand to other countries - or continents - outside of the USA?
2) Do you think they will expand to your country?
Or are similar policies in your country already in place?
3) Do you think political authorities' anti-cryptos bias will go away in the next future? Or will get stronger?
What is necessary for them to go away?
Your vote in the poll is much appreciated
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