Paul Grewal, chief legal officer at Coinbase, took to X to demand answers after learning from an AIMA survey that 75% of cryptocurrency hedge funds are having issues accessing basic banking services. None of the traditional alternative investment managers (such as real estate) have had similar problems with banks.
Grewal's X post raises questions that have already been circulating in the media for a long time. Maybe you've heard about Choke Point Operation 2.0 Or read about Revised documents Published by Coinbase The Federal Deposit Insurance Corporation is publicly asking banks to temporarily halt all cryptocurrency-related operations. The Alternative Investment Management Association (AIMA) survey report provides these concerns with new statistical grounds. Along with Grewal, AIMA calls for... an act In the press release.
The poll was conducted in October, and its results were alarming. Before we move on to the main points from the press release, we should stress that according to AIMA, debunking is an issue limited to cryptocurrency hedge funds. AIMA surveyed 20 other non-cryptocurrency alternative investors, and none of them had problems receiving basic banking services.
Key takeaways from the AIMA press release
The main points from the AIMA press release are as follows:
- AIMA surveyed 160 cryptocurrency hedge funds. Three-quarters of them reported having had problems accessing or developing standard banking services in the past three years.
- Problems may include a complete denial of service. Only 2% of hedge funds whose relationships were about to end received a formal explanation. The reason cited was that banks were limiting cryptocurrency customers.
- According to AIMA, the de-banking of cryptocurrency companies (so-called “Operation Choke Point 2.0”) undermines the operational efficiency of the US cryptocurrency sector, negatively impacts investor confidence, and harms the acquisition of skilled professionals.
John D'Agostino, co-chair of the digital assets group AIMA, concludes that banking challenges are not a niche problem as they weigh heavily on the overall development of the US economy and innovation.
Full report available here.
AIMA calls for change, and Trump pledges to end Operation Choke Point 2.0
AIMA calls for a collaborative effort to address the challenges faced by the cryptocurrency business. The association sees the solution in working closely with the new administration, leaders in the banking field, and policy makers.
During the 2024 presidential campaign, Trump, who had been showing hostility toward the original Operation Choke Point that began during Obama's tenure in the White House, announced that he would shut down Operation Choke Point 2.0 once elected.
However, as Data As Jerome Powell noted during an FOMC event, Trump will have to deal with many cryptocurrency skeptics, including those with enormous influence and high positions.
Wait a minute! Isn't Operation Choke Point 2.0 just a conspiracy theory?
Let's start with a little history. Operation Choke Point, unleashed during the Obama presidency, was a secret Department of Justice program aimed at denying banking services to fraudsters of all types, including those trafficking in ammunition, pornography, drug paraphernalia, etc. The idea was very simple: if we relentlessly cut off access to the financial operations of fraudsters, they would not be able to break the law, and many crimes would be prevented.
The process quickly gained notoriety, as bank break-up, due to the lack of clear restrictions, turned into a weapon against political enemies rather than protecting society from fraud and crime. In 2013, Critics Program came to believe Fighting political opponents was the main goal of Operation Choke Point. During the 2016 presidential campaign, Donald Trump promised to eliminate this process.
While Operation Choke Point was officially deployed under Obama, the existence of a modern Operation Choke Point 2.0 has not yet been confirmed. However, leaked documents and cases like the one described in the AIMA press release make people believe that an operation similar to Choke Point currently exists targeting cryptocurrency companies. The process is in effect, ignoring its official name. Although the Federal Deposit Insurance Corporation (FDIC) appears to be the main player in the process, there are other dysfunctional institutions that are pushing banks to limit services to clients operating in the cryptocurrency sector.
Some experts covering this "operation" have expressed the view that the FDIC's attack on the cryptocurrency industry is a reaction to the turbulent events that rocked the cryptocurrency market in 2022. These include the collapse of FTX, TerraUSD losing its peg and collapsing completely , Celsius and Voyager. Freezing user accounts, etc.
However, let's take a closer look at the documents released by Coinbase in December 2024. We will discover that the FDIC was pressuring banks to stop working with cryptocurrency companies before these events. Although the above cases are not the result of FDIC actions, they did occur in circumstances where banks were actually forced to temporarily stop service to cryptocurrency customers.
Possible effects of Operation Choke Point 2.0
Banks do not have a clear checklist to determine whether a customer can access services. In a situation where banks cannot decide on the risk ratio they want to operate at, they may prefer to block services to customers dealing with cryptocurrency to avoid a backlash from the FDIC.
AIMA has already expressed the potential implications. To a large extent, the pressure on banks and the lack of clear regulations will hinder innovation in the United States and make the country unattractive for companies in the cryptocurrency sector.
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