Operation Chokepoint 2.0: Is It a Government Conspiracy?
Operation Chokepoint 2.0
Key Takeaways
- Operation Chokepoint 2.0 is a term critics use to describe what they see as regulators targeting the cryptocurrency industry.
- Critics point to actions like pressure on banks to restrict crypto businesses’ access to banking.
- Some counterarguments support regulatory scrutiny of crypto firms as a legitimate effort to combat money laundering and protect the financial system.
- The lack of clear guidelines and the collapse of some crypto-friendly banks raise concerns about the environment for crypto businesses.
“Operation Chokepoint 2.0 is an informal term used by critics to describe U.S. government regulators’ targeting the cryptocurrency industry, because it is perceived as risky or controversial.”
The original Operation Chokepoint was a U.S. government initiative launched in 2013 by the Obama administration. It was a coordinated effort between the Department of Justice (DOJ) , the Federal Deposit Insurance Corporation (FDIC ), and the Office of the Comptroller of the Currency (OCC) . Its goal was to reduce access to banking services for businesses at a high risk of fraud or money laundering, such as payday lenders, firearms dealers, and other industries considered vulnerable to illegal financial activities.
According to official US government information , initiated in 2013, Operation Chokepoint represented “an expansive investigation of banks and payment processors to combat consumer fraud by choking out fraudsters’ access to payment systems.”
Though the program officially ended in 2017, its controversial legacy remains relevant as new regulatory efforts emerge consistently.
This article explains Operation Chokepoint 2.0, its intricacies, and the debates and arguments surrounding this polemic term, especially in relation to the crypto industry.
Understanding Operation Chokepoint 2.0
For many, Operation Chokepoint 2.0 is a conspiracy theory, which is a belief that events or situations are the result of a secret, often sinister, plot created by a specific group or organization. For example, the Illuminati conspiracy theory suggests that a secretive political group controls the economy and major world events.
There is no formal government program under the name Checkpoint 2.0. It is based on the belief that regulators such as the DOJ, the FDIC, the OCC, the Financial Crimes Enforcement Network (FinCEN) , and the Securities and Exchange Commission (SEC) are using various methods to limit the cryptocurrency’s access to financial services, resulting in a direct negative impact, following the original Operation Chokepoint, which targeted other industries considered high-risk.
Checkpoint 2.0 suggests that the regulatory pressure on financial institutions discourages them from working with crypto businesses, although there is no formal program under this name.
Alleged tactics used by regulators about Operation Chokepoint 2.0 include:
- Informal guidance: This guidance can include communicating to banks, often through meetings or written correspondence, about the potential risks associated with certain cryptocurrency businesses.
- Pressuring banks: Potentially pressure financial institutions to reassess their involvement with cryptocurrency-related businesses through regulatory inquiries, threats of enforcement actions, or public statements that could damage the reputation of banks that work with the crypto industry.
- Hostile environment: Creating a climate of fear or uncertainty for banks that want to serve the crypto industry. This can lead to banks cutting ties with crypto firms to avoid potential regulatory trouble, even if the government has not accused them of fault.
Regulatory Practices or Regular Legal Action?
There are examples of specific cases where banks faced scrutiny or restrictions.
- Signature Bank: The institution came under significant regulatory scrutiny, leading to its closure in 2023. Despite the bank’s claims of managing crypto-related deposits responsibly, critics argue that the regulatory pressure was part of an orchestrated effort to cut crypto firms from mainstream banking.
- Silicon Valley Bank (SVB): The collapse of SVB in 2023 has also been linked to the regulatory pressures associated with Operation Chokepoint 2.0. Critics, including former White House Chief of Staff Mick Mulvaney, suggested that the bank’s crypto connections may have contributed to its collapse.
Several incidents have raised concerns. Regulatory scrutiny has generally included anti-money laundering (AML) measures and concerns over financial stability. Still, at the same time, it has created an environment in which clear guidelines and explicit direction are absent.
Critics argue that these regulatory practices have been observed in Checkpoint 2.0 in several key incidents. The SEC has regularly pursued legal action against major cryptocurrency platforms. Specific examples are:
- SEC vs. Ripple Labs: In December 2020, the SEC sued Ripple Labs, alleging that its XRP token was an unregistered security. The SEC has until October 2024 to decide whether to appeal the partial ruling in Ripple’s favor, which will significantly impact the crypto industry.
- SEC vs. Binance: In June 2023, the SEC sued Binance, accusing it of violating securities laws. The court dismissed some of Binance’s arguments and allowed the majority of the case to proceed. The case has not been fully resolved.
- SEC vs. Coinbase: In June 2023, the SEC also sued Coinbase, alleging that it was operating as an unregistered securities exchange. As of September 2024 a US federal judge has ruled that shareholders’ claims against Coinbase, alleging that the company misled them about the risks of a potential SEC lawsuit, have validity.
As part of his campaign, Donald Trump has criticized Operation Chokepoint 2.0, stating that he will immediately shut it down. “They want to choke you; they want to choke you out of business. We’re not going to let that happen,” he said during the Bitcoin Conference in Nashville in 2024.
In contrast, Vice President Harris has not publicly discussed her position on cryptocurrencies.
Arguments for a Government Conspiracy
Critics of the alleged government conspiracy theory surrounding Operation Chokepoint 2.0 argue that the evidence is based on the following aspects:
- Coordinated action: Multiple agencies are involved, suggesting a shared goal.
- Targeted Industries: Focus on cryptocurrency and other sectors, raising concerns about selective targeting.
- Lack of transparency: Informal guidance and limited public information.
- Political motivations: Industry controversies and potential threats to established economic interests.
Arguments Against a Government Conspiracy
Some of the arguments supporting the idea that Operation Chokepoint 2.0 is not a real government conspiracy include the following:
- Government’s mandate: Regulatory bodies are responsible for protecting the financial system from instability and disruptions, particularly from volatile sectors like cryptocurrency.
- Money laundering and fraud concerns: The cryptocurrency industry has been associated with significant risks of illicit activities, leading to increased regulatory scrutiny.
- Industry-specific risks: Cryptocurrencies present unique challenges and opportunities for decentralized finance (DeFi).
- Clear guidelines and enforcement: Explicit rules and proper enforcement are necessary to prevent instability and crises within the financial system.
Conclusion
Operation Chokepoint 2.0 is a controversial subject due to the perceived targeting of the cryptocurrency industry. On one side, critics point to actions like regular informal guidance and pressure on banks as evidence of this targeting. The regulatory scrutiny creates a hostile environment that hinders innovation and competition in the crypto industry.
On the other side, regulatory agencies argue that their actions are necessary to protect the financial system from the risks associated with cryptocurrency.
The closures of Signature Bank and Silicon Valley Bank have added fuel to the debate, but they are just two of many examples. The debate is still alive and centers on whether the increased scrutiny is a necessary response or a veiled attempt to choke out the crypto industry. Unsurprisingly, it has also been largely politicized, with Trump taking a prominent role.
FAQs
Since Operation Chokepoint 2.0 is an informal term rather than an official initiative, its effectiveness is debated. Critics argue that regulatory pressure has led some banks to distance themselves from the cryptocurrency industry. Operation Chokepoint 2.0 is perceived as targeting the cryptocurrency industry, while the original Operation Chokepoint focused on various sectors. Both are criticized for using indirect regulatory pressure on banks to limit financial services to industries seen as high-risk. The potential consequences can include reduced access to banking services for cryptocurrency businesses, decreased innovation, and pushing companies to move operations to countries with fewer restrictions. It could also negatively affect financial institutions, discouraging them from working with the crypto industry due to regulatory concerns affecting the broader crypto landscape.Has Operation Chokepoint 2.0 been effective in achieving its objectives?
How does Operation Chokepoint 2.0 compare to the original Operation Chokepoint?
What are the potential consequences of Operation Chokepoint 2.0?
