Rob Leshner founder of Compound Labs confirmed the existence of Operation Chokepoint 2.0.
Blockworks spoke with The Empire Podcast guest about the phenomenon of de-banking after tweeting recently: “Make no mistake. The government wants to kill one of the most innovative segments of the US economy, which is crypto.”
Leshner claimed that the statement is no longer controversial. “There is a coordinated effort to de-bank the crypto industry through not entirely normal policy.” Leshner explained that much of the work is done behind closed doors. This is similar to how Chokepoint 1.0, a decade back, tried to bankrupt a legal sector by putting on red tape and making it financially unsustainable.
Leshner said that Silvergate and Signature Bank are the main US entry and exit points between banking and cryptocurrency. “Both of these went from functional to non-existent in an incredibly short amount of time following statements by banking industry regulators.” He said that a number of lawmakers and players in the eco-system were eager for the banks to cease their crypto activity.
The banks are operating normally without crypto
Even post-failure, the entire banking apparatuses of Signature – outside of crypto – continue to function normally. “Signature was sold to another bank and all of their customers, with the exception of crypto customers, are up and running” Leshner says. Crypto companies – and only crypto companies – were de-banked in this process.
After the sale, neither the Signet Payment System nor the crypto balances have been restored. Overnight, the bank went from one of many institutions that served crypto business to not serving any at all. “Silvergate, likewise, is 100% offline for crypto companies” Leshner noted.
Leshner observed, “At this point, there’s no mainstream supported infrastructure for legal institutions that interact with crypto to interact with the banking system.” A single bank – Cross River Bank – has essentially become the lone bridge between banking and crypto organizations, Leshner said.
Nic Carter said that Cross River was the last remaining bank to be explicitly pro-crypto. He is also board chairman at Coin Metrics. Carter explained the challenges facing banks. “increasing demand for higher compliance overhead, endless paperwork requests from regulators, and demands that they reduce exposure to crypto.”
Carter also said that Cross River Bank has been criticised for its role in the PPP programme. “helped businesses keep their workforce employed during the Covid-19 crisis.”
“Even though PPP was explicitly disseminated with the understanding that there would be fraud,” Carter explained, “the government deliberately overlooked that with the intent of getting funds out the door quickly.”
It seems that the government is now changing its tune at least in regards to Cross River Bank. “It’s a bit of a pretext that now Cross River Bank is being looked into for being too loose with their PPP disbursements,” Carter Said “because that was precisely the objective of the government program.”
Leshner’s conclusion was based on his reflections of the past events. “The map was wiped clean in an incredibly short amount of time due to government action in an unanticipated way…There’s an effort to de-bank crypto and it’s been – unfortunately – incredibly effective.”
“The message remains clear,” Carter Said “bank crypto firms, and risk losing everything.”
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