Operation Chokepoint 2.0: US Banking Regulators Targeting Crypto Businesses

According to a recent white paper released by four members of Cooper&Kirk Law Firm, US banking regulators are reportedly attempting to “drive crypto business out of the financial system.”. This paper, entitled “Operation Chokepoint 2.0”, points out that U.S. banking regulators are ostensibly waging a “secret financial war” against the encryption industry. After laying the foundation for labeling legitimate companies as “reputational risk,” federal banking regulators, with the help of state officials, “have shifted to the task of clearing accounts from every bank they supervise.”.

Law Firm Paper: US banking regulators are waging a “secret financial war” against the encryption industry

Introduction

In a recent white paper released by four members of Cooper&Kirk Law Firm, US banking regulators are reportedly attempting to “drive crypto business out of the financial system.” The white paper, titled “Operation Chokepoint 2.0,” claims that the US banking regulators are waging a “secret financial war” against the encryption industry. The operation targets cryptocurrency businesses by labeling them as “reputational risk” and clearing their accounts from every bank they supervise with the help of state officials. This article will explore the new development and its potential impact on the digital currency space.

Operation Chokepoint 2.0: Overview

Operation Chokepoint was first launched in 2013 by the Obama administration to crackdown on fraudsters using the US banking system. Its aim was to prevent fraudulent lenders from accessing the traditional banking infrastructure. However, the operation faced criticism when it was alleged that it targeted and forced legitimate businesses out of the financial system. It resulted in thousands of small businesses having their bank accounts closed without any explanation, leaving them without access to the traditional financial infrastructure.
In 2017, the US Department of Justice (DOJ) officially discontinued Operation Chokepoint. However, recent reports suggest that banking regulators are using a similar tactic to target the newer and emerging cryptocurrencies industry.

Crypto Businesses Labeled as “Reputational Risk”

According to the paper, banking regulators are labeling legitimate cryptocurrency businesses as “reputational risk” to justify blocking their access to fiat banking infrastructure. This is a term used by regulators to categorize businesses and individuals who are allegedly involved in money laundering, terrorism financing, or other illegal activities.
However, the report suggests that regulators are using it to target businesses that operate transparently and legally. The report further suggests that regulators are relying on stereotypical assumptions about cryptocurrencies and blockchain technologies, which portray them as havens for criminal activities.

Clearing of Accounts by Banking Regulators

The white paper alleges that the Federal Reserve, the Department of Treasury, and other US banking regulators are working behind the scenes to force banks to clear the accounts of all crypto businesses they supervise. If they find that banks continue to support crypto businesses, they may face severe regulatory sanctions.
Additionally, these regulators are also purportedly working with state officials to list crypto businesses as “suspicious entities” and deny them access to the same level of due process as other businesses. This move would prevent them from challenging the regulators’ decisions and appealing if necessary.

The Impact on Crypto Businesses

The continued efforts of US banking regulators could have a debilitating effect on crypto businesses. Banks are a vital lifeline for any business, and without bank accounts, it would be challenging for crypto businesses to operate. They will have difficulty paying their employees, vendors, and suppliers. It will also restrict access to new corporate customers, making scaling up their businesses difficult. Essentially, this tactic will ultimately limit the growth and innovation of the digital currency industry within the US.

Conclusion

US banking regulators are reportedly attempting to “drive crypto business out of the financial system” by labeling them as “reputational risk” and blocking their access to fiat banking infrastructure. Operation Chokepoint 2.0 could have a devastating impact on the digital currency space, and if continued, it will halt the growth and innovation of the industry.

FAQs

1. What is Operation Chokepoint 2.0?
Operation Chokepoint 2.0 is a similar tactic employed by US banking regulators to target the emerging cryptocurrency industry as they did previously with fraudsters.
2. What effect will it have on Crypto businesses?
It could have an impact on the future growth and innovation of digital currency space, halting the progress, limiting access to new corporate customers, difficulty scaling up businesses, and making day to day operations of the companies impossible.
3. What are banking industry regulators doing about it?
Banking regulators, including the Federal Reserve, the Department of Treasury, and other US banking regulators, are working behind the scenes to cut off the accounts of all crypto businesses they supervise.