- Federal regulators are targeting legal crypto businesses to cut them off from the banking rails through an alleged operation called ‘Choke Point 2.0.’
- Banks are being forced to shut down owing to their services to the crypto businesses.
- As a consequence of tightening regulations and enforcement, crypto businesses might continue facing troubles in accessing banking services.
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Crypto companies continue to face multiple challenges from federal regulators and their tightening regulations in gaining complete access to banking services to reach their target customers. This is particularly evident in the US where regulators are trying to crack down on the industry. Experts and critics are referring to this alleged operation as, “Choke Point 2.0”.
Whether it is a coordinated agenda to clamp down on crypto business or a mere legal move against undesirable business activities, Choke Point 2.0 is a perfect storm for the US crypto industry. Analysts believe that the new year would see increased sanctions on the industry.
Read on to unveil the implications and consequences of Choke Point 2.0 for the crypto industry.
Inception of Operation Choke Point
Originally, the US Department of Justice initiated the operation back in 2013 to mitigate the transactions and dealings of banks with firearms dealers, drug businesses, payday lenders and other financial institutions that were susceptible to money laundering and scams.
The operation is believed to be an Obama Justice Department effort against high-risk industries and companies.
However, it became highly unpopular among the general public partly due to its rogue nature and partly because it was never formally drafted or implied with the unanimous voting or consent of the US politicians.
Choke Point 2.0
The US government is accelerating its efforts to mitigate crypto’s fiat access which might continue to damage the industry’s progress.
The coordinated operation against the crypto industry has popularly become to be known as Operation Choke Point 2.0, a term coined by one of the long-time pro-crypto venture capitalist Nic Carter. The primary tactic of the operation attempts to put pressure on banking institutions and prevent them from holding crypto deposits or offering services to crypto businesses to maintain safety for the banking rails.
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In his post Carter described the operation as, “an effort to marginalize the industry” and “cut it off from the banking system”.
On January 3rd, the operation’s second version came into full effect. The Federal Reserve along with Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) in a joint statement disclosed the details of the operation and asserted that banks will stop holding crypto deposits and discourage dealings with the sector as a whole.
The same month also saw a newly released Fed policy that makes it even harder for crypto banks to kickstart. Moreover, Biden’s administration has also introduced a cryptocurrency roadmap for pension funds to shy away from the crypto sector.
The earliest example of the second phase of the operation was when JPMorgan unexpectedly shut down the bank account of Uniswap founder Hayden Adams without any prior notice.
Experts like Mick Mulvaney, who has served as an acting chief White House chief of staff also believe that the collapse of Silicon Valley Bank was owing to the implications of Operation 2.0.
Lately, the takeover of Signature Bank and Federal Deposit Insurance Corporation’s (FDIC) unusual treatment of crypto assets also further proves the existence of the infamous operation.
Positive Developments Amidst the Raging War Against Crypto
Amidst the raging battle against the crypto industry, almost all the crypto projects, protocols, and companies are at risk.
Despite the anti-agenda against the crypto sector, the US cannot clamp down on the cryptomarket outside its jurisdiction.
On the other hand, there are various positive developments for the crypto business. Many countries like the UK, Hong Kong and the UAE are adopting a welcoming attitude to attract crypto firms.
The Bottom Line
The new year has witnessed new troubles and increased regulations for the crypto industry. However, the recent positive developments have made the pro-crypto community optimistic about the industry’s future. Analysts believe that these tightening regulations could consequently result in further growth and wider acceptance of cryptocurrencies.
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