If FTX is a monarch butterfly flapping it’s wings in Amazonian rainforest “Operation Choke Point 2.0” The crypto-industry in the US is currently experiencing torrential rainfall.
Biden’s White House and Federal Reserve along with the OCC, FDIC, DOJ, DOJ, “influential members of Congress” All are in cahoots, hell-bent on blocking crypto access to fiat currency and suffocating the entire industry.
Nic Carter, a longtime cryptocurrency supporter and venture investor, has a theory.
Carter’s post, “Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs,” The article outlines several headlines that are bearish, and when they’re added together, it seems to suggest a government-backed concerted effort to dissuade traditional financial institutions from providing services to the crypto industry.
Fiat’s on and off ramps should be the first target. Silvergate received a letter from Sens. Roger Marshall, Elizabeth Warren, and John Kennedy were the first to notice rival Signature’s decision in December to halve the value of all crypto-related deposit.
A joint statement by the FDIC and OCC, as well as Federal Reserve, was released in January. “strongly discouraged” Metropolitan Commercial Bank’s decision to shut down all crypto-related businesses was a direct result of banks not supporting cryptocurrency.
Late January the US Federal Reserve denied Custodia’s (formerly Avanti’s) application to enter the Federal Reserve. It had taken more than two year to process the application.
While Anchorage, a crypto-custodian firm, became the nation’s first National Trust Bank (with conditions) in 2021 other companies such as Paxos or Protego are yet to receive a similar approval.
Carter writes that labeling banks with cryptographic-facing bank “high risk” has four direct effects: higher premiums with the FDIC, lower cap rate with the Fed (inhibiting ability to overdraw), restrictions on other business activities and the risk of a poor examination score with regulatory supervisors (inhibits M&A ability).
Operation Choke Point’s first MO
Ring-fencing US crypto — separating it from sorely needed banking rails — echoes the DOJ’s Operation Choke Point from last decade, Carter says.
In 2013, the DOJ announced a goal that was eerily similar: to eliminate from banking systems undesirable businesses, those with a reputation of money laundering or fraud. This included payday lenders.
“Operation Choke Point has had a demonstrable chilling effect on commerce,” Iain Murray, for Competitive Enterprise Institute wrote in a Carter-cited report.
“Most such banks cannot afford the extra supervision that comes with a Choke Point subpoena. Thus, they often face no other choice but to drop payment processors and designated ‘high-risk’ clients altogether.”
Murray was concerned that, in the near future, other political undesirable industries such as marijuana dispensaries, or abortion providers could also be targeted.
Operation Choke Point is a campaign which lasted for years and was designed to impact the industry’s health. Carter argues that crypto-sequel is taking place in front of our eyes.
So, when suspiciously Choke-Pointey headlines crop up — like Bybit suspending US dollar deposits, or Circle ceasing automated clearing house payments — it seems logical to draw a line straight to the Feds behind the curtain.
Crypto has it tough
At this stage, it’s important to stress that there is no concrete evidence to suggest a conspiracy by the US government to use risk premiums as a way to isolate crypto from US banks.
They may or may not be in it together. Recently, US regulators, lawmakers and agencies seem to be more pessimistic than ever about the future of crypto-currencies. They could be able to outperform their total potential, for example, in a secret government operation.
All this begs the question: what would it take to unwind all things negative for crypto’s banking status since FTX — be they part of Operation Choke Point 2.0 or something more organic.
“Administration change is really the only thing,” Carter told Blockworks. “There’s consensus in the Biden administration, and among the bank regulators, that crypto should be marginalized.”
It is interesting to see how the first Operation Choke Point unfolded. In 2017, a Congressional probe into the campaign brought an end to it.
“So it’s possible the House could ask questions about the overreach here,” Carter said
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