One popular theory going around is that the United States government is making a way to de-bank crypto institutions via Operation Choke Point 2.0. However, the New York Department of Financial Services (NYDFS) dismisses such claims as both “ludicrous” and “silly”. Here’s a quick look at the conspiracy theory being thrown around the bag and the answer of a regulator to it.
What is Operation Choke Point 2.0?
Operation Choke Point 2.0 refers to a theory that some regulators in the U.S. are working to cut off the crypto industry from the banking system. This is actually similar to a previous effort by the government to cut off banking services to legal but controversial businesses way back from 2013 to 2017. This new version of the theory has been fueled by the circumstantial closure of several banks closely tied to the crypto industry, including Signature Bank.
Office of the Comptroller of the Currency (OCC) former head Brian Brooks alleged that the move of the federal government specifically targeted banks or financial institutions catering to cryptocurrency customers. This is further supported by a White House Council of Economic Advisers report that highlighted the negative sentiment of the US government’s executive branch with all stuff related to crypto.
NYDFS Denies the Existence of Operation Choke Point 2.0
NYDFS Superintendent Adrienne Harris dismissed the whole idea as “ludicrous” and “silly”. She stated that the closure of Signature Bank was unrelated to crypto and was instead due to a new-fashioned of bank runs caused by a high percentage of uninsured deposits and a lack of liquidity management protocols.
Harris emphasized that her agency’s rules necessitate virtual asset companies to have strong banking partnerships with well-regulated banks and that there are rules in place that provide a clear road map for crypto companies wishing to operate in New York. In other words, there are already established measures to protect them as well as their consumers.
The regulator’s claims are substantiated by the closure of several financial institutions such as Signature Bank, Silicon Valley Bank, and Silvergate Bank due to issues unrelated to crypto. Likewise, she noted that it just does not make any sense for the agency to bar the operation of crypto-friendly banks at this point.
Final Thoughts
While there have been worries about Operation Choke Point 2.0 and a coordinated effort to cut off the crypto industry from the banking system, NYDFS made it clear that there is nothing to gain from such a drastic measure. Likewise, the circumstances leading to the collapse of banks considered to be crypto-darlings are mostly related to operational failure coupled with a new-fashioned bank run caused by a high percentage of uninsured deposits and a lack of liquidity management protocols. All of these do not necessarily constitute a coordinated effort to cut off the industry from the banking system.
The potential impact of Operation Choke Point 2.0 on the crypto industry cannot be underestimated. However, it is important to note that it is a mere theory when there’s no concrete evidence supporting it.