FDIC’s “Operation Choke Point 2.0” Exposed: A Turning Point for Cryptocurrency Banking?

Imagine waking up to find your bank account frozen, not because of any wrongdoing on your part, but because you dared to engage with cryptocurrencies. This nightmare scenario became a reality for many crypto clients, thanks to what’s been called “Operation Choke Point 2.0” by the Federal Deposit Insurance Corporation (FDIC).

• FDIC pressured banks to halt crypto services
• New leadership signals potential policy shift
• Bipartisan opposition emerges against debanking

On February 5, 2025, the FDIC released a staggering 175 documents, unveiling the extent of their alleged initiative to pressure banks into pausing operations with cryptocurrency clients. This release, strategically timed to coincide with a U.S. Senate Banking Committee GOP hearing on debanking, has sent shockwaves through the crypto community and beyond.

The FDIC’s actions, dubbed “Operation Choke Point 2.0,” echo the controversial tactics used in the original Operation Choke Point, which targeted various industries deemed risky by regulators. This time, the focus was on the burgeoning crypto sector, with the FDIC citing concerns over reputation risks, crypto volatility, and consumer protection as justifications for their crackdown. “Operation Choke Point,” originally launched under the Obama administration, aimed to cut off financial services to businesses considered high-risk. Now, “Operation Choke Point 2.0” extends this approach to the cryptocurrency industry.

Banks that resisted or questioned these directives were met with prolonged silence from the FDIC, a tactic described by Coinbase’s Chief Legal Officer, Paul Grewal, as “regulation by exhaustion.” Think of it like trying to win a staring contest with a regulator – it’s a battle of endurance, and the banks usually blink first. Coinbase, a leading cryptocurrency exchange, played a pivotal role in exposing these practices. In 2024, the company sued the FDIC under the Freedom of Information Act (FOIA), forcing the agency to release some of the incriminating documents. FOIA, for those new to the term, is a federal law that allows for the full or partial disclosure of previously unreleased information and documents controlled by the U.S. government.

The tide may be turning, however, with the appointment of Travis Hill as the new FDIC chair. Hill, known for his more crypto-friendly stance, has promised a reevaluation of the agency’s approach to crypto-related activities. In his own words,

“The FDIC is going to reevaluate [their] supervisory approach to crypto-related activities.”

This shift could mark a significant change in how the FDIC interacts with the crypto industry.

Perhaps even more surprising is the emergence of bipartisan opposition to the FDIC’s debanking tactics. Even Senator Elizabeth Warren, traditionally a vocal critic of cryptocurrencies, has taken action against these unfair practices. Over half of the debanking complaints in the last three years have been leveled at four major banks: Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup. “Debanking” refers to the practice of banks closing accounts or denying services to customers without sufficient cause, often leaving them without access to financial services.

The release of these documents and the subsequent shift in FDIC leadership represent a critical juncture for the cryptocurrency industry. It’s a moment that could mark the beginning of the end for “Operation Choke Point 2.0” and a potential shift towards more balanced and crypto-friendly regulations.

As we navigate this evolving landscape, it’s crucial to understand the implications:

• What is Operation Choke Point 2.0?

  An alleged initiative by the FDIC to pressure banks into halting services for cryptocurrency clients, effectively debanking them.

• How did the FDIC’s actions affect cryptocurrency clients?

  The FDIC’s actions led to banks pausing operations with crypto clients, stripping them of banking services without a proper cause.

• What role did Coinbase play in this situation?

  Coinbase sued the FDIC in 2024 and used the FOIA to force the agency to release documents revealing their actions against crypto clients.

• How has the new FDIC leadership under Travis Hill changed the approach to cryptocurrency?

  Under Travis Hill, the FDIC has promised to reevaluate its supervisory approach to crypto-related activities, signaling a more crypto-friendly stance.

• Why did Senator Elizabeth Warren get involved in the issue of debanking?

  Despite her traditionally critical view on cryptocurrencies, Warren investigated unfair debanking practices and took action, reflecting bipartisan opposition to such actions.

• What were the reasons cited by the FDIC for restricting services to crypto clients?

  The FDIC cited reputation risks, crypto volatility, and consumer protection as reasons for their actions against crypto clients.

• What is the significance of the bipartisan support against debanking?

  It signals a strong political pushback against the FDIC’s actions, potentially leading to policy changes and better protection for cryptocurrency clients’ banking rights.

While the release of these documents and the shift in FDIC leadership are steps in the right direction, the battle for fair treatment of cryptocurrency clients is far from over. As the industry continues to grow and mature, it’s essential that regulators work with, rather than against, this transformative technology. The future of finance hangs in the balance, and it’s up to all of us to ensure that the potential of cryptocurrencies is realized, not stifled by outdated regulatory tactics.