A monetary policy analyst at the Cato Institute said the people in the crypto industry have been undermined through “de-banking” efforts in what has become known as “Operation Choke Point 2.0.”
“The de-banking of people using cryptocurrency and working in the space has likely had at least two broad effects,” Nicholas Anthony, policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives, told Fiat Reporter. “First, it has undermined many of the people trying to work and innovate in this space. It's sent the message that neither they nor this innovation are welcome in the United States.”
“Second, it has undermined many people's faith in the rule of law,” said Anthony. “It has shown that Americans can operate by the letter of the law and still find themselves the subject of government scrutiny.”
Anthony, also is a fellow at the Human Rights Foundation (HRF), researches topics within the field of monetary and financial economics, including central bank digital currency (CBDC), financial privacy, and cryptocurrency.
"Operation Choke Point" was a 2013 initiative by the U.S. Department of Justice that pressured banks to sever ties with businesses deemed “high-risk” by certain Obama administration officials, such as payday lenders and gun dealers.
Critics argued that this strategy unfairly targeted legal industries without due process, leading President Donald Trump to terminate the operation in 2017.
Recently, allegations have surfaced about a similar campaign, dubbed "Operation Choke Point 2.0," allegedly targeting the cryptocurrency sector.
Documents obtained by Coinbase suggest that the FDIC advised banks to "pause" crypto-related activities in 2022, raising concerns about potential de-banking of crypto firms.
In response, David Sacks, appointed as the incoming Trump administration's "Crypto Czar," has acknowledged these concerns, stating that "there are too many stories of people being hurt by Operation Choke Point 2.0" and emphasizing the need for an investigation. Sacks is a venture capitalist and entrepreneur who co-founded PayPal and served as its Chief Operating Officer.
"The best advice I have for David Sacks is to first leverage his connections in the tech industry to find out the scope of who has been affected," said Anthony. "All too often, issues like these get buried because it's not something people usually share publicly. However, he has a real opportunity to gather those stories and then use his position with the administration to investigate the government's role in this story."
"To that end, Sacks should look into the application of the Bank Secrecy Act, the regulation of reputational risk, and the communications regulators send to financial institutions," said Anthony.
Additionally, the Trump advisory team, including Elon Musk and Vivek Ramaswamy, is reportedly considering significant changes to banking oversight, potentially targeting agencies like the FDIC, which have been implicated in these de-banking practices.
In a recent episode of The Joe Rogan Experience, venture capitalist Marc Andreessen discussed the resurgence of de-banking practices reminiscent of the original Operation Choke Point.
"We've had like 30 founders de-banked in the last four years,” said Andreessen. “It's been a big recurring pattern."
"There's no rules, there's no court, there's no decision process, there's no appeal,” Andreessen said. “Who do you go to to get your bank account back?"
Calling it “Operation Choke Point 2.0,” Andreessen described it as a "privatized sanctions regime" that allows bureaucrats to target American citizens similarly to how the U.S. imposes sanctions on foreign adversaries.
"They don't have to de-bank you, they just have to put pressure on,” he said.
Andreessen argued that this enables the government to sidestep constitutional limitations on direct action against individuals.
"The Trump Administration and Congress can have an impact here," said Anthony. "As I have detailed in a forthcoming report, Congress should remove the confidentiality requirements that have forced banks to leave customers in the dark when accounts are closed. From there, Congress should remove reputational risk from the toolkit of regulators."
"And finally, Congress should reform the Bank Secrecy Act regime," he said. "Clever officials may still find ways to pressure financial institutions, but these reforms would go a long way shedding light on the issue and taking some of the go-to tools off the table."