According to venture capitalist and longtime cryptocurrency advocate Nick Carter, the recent crackdown on the U.S. cryptocurrency industry can be called “Operation Chokepoint 2.0.”
Carter claims that intergovernmental organizations are trying to choke and destroy the crypto industry.
Carter’s post titled “Operation Chokepoint 2.0 Ongoing, Cryptocurrencies Are at a Crossroads” combined with a series of negative news stories discouraged traditional financial institutions from supporting the cryptocurrency industry. suggests a deliberate government-led attempt to .
What is an Operation Chokepoint?
In 2018, the Conservative Washington political news outlet The Hill published an op-ed by Frank Keaton, former president of the American Bankers Association, entitled “Operation Chokepoint Reveals True Corruption in Obama’s Justice Department.” announced.
Keaton said Operation Chokepoint was a relatively unknown program run by President Obama’s Department of Justice (DOJ). According to Keaton, the program unfairly targets small businesses and has had no impact on those involved. The program used federal authorities to pressure banks to close corporate accounts simply because of ideological differences.
“Operation Chokepoint had more in common with the purge of an ideological adversary than with the enforcement of regulations. In fact, that seems to have been the goal.”
Keaton noted that officials from both the OCC and the FDIC have threatened regulatory consequences if banks do not comply with the demands, and the program has operated unchecked for years. said. As a result, legitimate businesses such as gun and ammunition dealers and payday lenders had their accounts closed by banks abruptly and with little explanation.
“The DOJ’s role in supporting and agitating this program is particularly troubling. It would have been inconceivable to deploy a
Keaton said its main purpose, as the name implies, is to stifle payday lenders and other high-risk businesses.
“As a former president of the National Bankers Association, I am appalled at the brazen threats made against banks during Operation Chokepoint. […] Banks must respond to federal and state laws rather than responding to the whims of individual regulators with retaliation against legitimate businesses. “
In 2017, the Trump administration made headlines when it allegedly eliminated the Operational Chokepoint. But, Carter said, since the Biden administration took office, TradFi’s top banks and financial institutions appear to have received top-down instructions to re-enforce Operation Chokepoint, possibly under a different name or form. .
“Neither the Fed/FDIC/OCC statement nor the NEC statement a few weeks later explicitly prohibited banks from serving cryptocurrency customers, but the text is on the wall and the Silvergate investigation is a powerful deterrent for banks looking to partner with crypto.What is now clear is that the issuance of stablecoins and transactions on public blockchains (where they can be freely circulated like cash) It is either highly discouraged or effectively prohibited.”
Operation Choke Point 2.0
According to Carter, Crypto Choke Point 2.0 diverges from its predecessor in several key ways. The first chokepoint, which relied on informal guidance and backdoor conversations, primarily threatened investigations by the DoJ and FDIC if financial institutions did not adopt the administration’s risk standards, which was a mistake. unconstitutional and ultimately gave Republicans the power they needed to repeal the program. .
According to Carter, Choke Point 2.0 is unambiguously deployed through written guidance, rulemaking, and blogging. The current regulatory crackdown on cryptocurrencies is presented as a concern about the safety and health of banks, not just a matter of reputational risk.
Blockchain Association’s Jake Chervinsky calls this “regulation by blog posts.” It is a process by which federal regulators can create policy (and, in the case of the Fed, expand its scope and power) simply by releasing guidance discouraging banks from dealing with cryptocurrencies. Rather than asking Congress for new laws. Custodia CEO Caitlin Long characterized the Fed’s rejection of her application as “shooting stallions to disperse the herd.”
Carter said banks facing cryptocurrencies are more risky and less capable of lowering insurance rates, unlike collateral assets. Carter said classifying banks as “high-risk” in the face of cryptocurrencies has four direct implications. Management risks being under-scored by regulators and undermining their ability to undertake M&A. “
Ultimately, Carter predicts that regulatory oversight and crackdowns in the U.S. have increased, so other jurisdictions such as Dubai, Singapore, Switzerland, Hong Kong and the U.K. will have to fill the slack. .
“If banking regulators continue their pressure campaign, they will not only lose control of the cryptocurrency industry, but ironically, by forcing their activities into less sophisticated jurisdictions, the risk will increase and potentially arise. You will not be able to manage the real risk.”