The Biden administration and federal regulators appear to be using whatever means necessary to cut the cryptocurrency industry off from banking services. Critical observers have dubbed this alleged effort “Choke Point 2.0” after a similar effort by the Obama administration to cut undesirable but legal industries off from the financial system.
Figures including Brian Brooks, former head of the Office of the Comptroller of the Currency (OCC), allege this has led to banks being targeted for shutdown, in part, because they served cryptocurrency customers. That would have no grounding in existing law or regulations, and may have caused collateral damage by fomenting instability in the banking sector.
A new report, authored by the White House Council of Economic Advisers, devotes a lot of space to crypto, and certainly confirms the negative sentiment in the U.S. executive branch. One former financial regulator described this report to CoinDesk as “a damning indictment of the space that makes [the Biden administration's] policy position crystal clear."
This follows a wave of bank shutdowns that some have alleged were triggered not just by financial stability concerns, but by the broader push to extralegally strangle cryptocurrency businesses. Former U.S. Rep. Barney Frank has explicitly claimed the shutdown of Signature Bank was intended “to send a message to get people away from [banking] crypto.” Frank is a member of Signature’s board, so he is motivated to claim crypto, rather than mismanagement, was to blame for the bank’s failure.
There is other support for the idea of an undisclosed crypto-strangling agenda. Reuters reported late last week the Federal Deposit Insurance Corporation (FDIC) required Signature’s acquirers to give up Signature’s crypto customers in the sale. The FDIC initially denied that report but, as with other recent events, its actions would seem to confirm it. Signature assets will now become part of Flagstar Bank, but the deal, announced on March 20, did not include roughly $4 billion in deposits belonging to crypto firms, according to a Flagstar statement.
As no less than the Wall Street Journal editorial board argued earlier this week, this seems to confirm the FDIC is not just actively pursuing an anti-crypto agenda, but is lying to the public about it. Nic Carter of Castle Island Ventures was the first to term this alleged initiative “Choke Point 2.0.” That refers to Operation Choke Point, an initiative of the Obama Justice Department to lean on banks that served gun manufacturers, payday lenders and other legal but undesirable industries.
Though executed under the cover of anti-money laundering efforts, multiple critics, including former regulators and the House Financial Services Committee, ultimately condemned Operation Choke Point as an abuse of power. Ultimately, new restrictions were placed on the power of the FDIC in the wake of Choke Point, in part to settle lawsuits brought by victims of the crackdown. It seems highly plausible that similar targeted bias is at play in the FDIC’s recent actions.
That may mean the agency faces another wave of official and legal backlash for its unauthorized initiative. But the damage – both intended and accidental – has already been done.
– David Z. Morris
@davidzmorris
david.morris@coindesk.com
