Operation Choke Point was a program launched by the US Department of Justice in 2013 to combat fraud – here regulators targeted banks and other financial institutions that provide services to businesses considered high-risk, such as payday lenders, firearm dealers, and online gambling sites. 🇺🇸
The program sought to cut off these businesses’ access to banking services , which could ultimately force them to shut down. Operation Choke Point was criticized for its potential to unfairly target legal businesses and for its lack of transparency. As a result, it was officially terminated in 2017. 🚫
Now, according to Nic Carter, the Co-Dounder of Coin Metrics, there is a coordinated effort to dissuade banks from providing financial services to crypto companies. Calling it Operation Choke Point 2.0, Carter claimed U.S. regulators are now targeting banks part of the crypto ecosystem that include Silicon Valley Bank, Silvergate and Signature. 👀
In January 2023, the Federal Reserve and two other agencies issued a joint statement that claimed, “It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.” 🏦
Carter also published a blog post last month, emphasizing that there is a government-backed effort to discourage banks from servicing companies part of the cryptocurrency industry. ❌
So, how will this influence the blockchain market in the U.S, Canada, and other global regions? Blockchain businesses may struggle to attract VC funding and fail to raise capital via traditional methods, such as debt. Most crypto exchanges will also be shut off from the banking system, resulting in outflows of crypto-related investments. 📉
The impact of the collapses of crypto friendly banks in the U.S. may trickle down to other economies, including in Canada, easily resulting in a funding winter for blockchain and related tech projects. 🥶
Will Canada follow suit and similarly crack down on the cryptocurrency sector? 🤔
Experts have warned that such an environment will be detrimental to economic growth. For instance, a report from the Competitive Enterprise Institute states, “Most such banks cannot afford the extra supervision that comes with a Choke Point subpoena. Thus, they often face no other choice but to drop payment processors and designated ‘high-risk’ clients altogether.” ⬇️
It will be interesting to see if these allegations turn out to be true. There is also a good chance for crypto firms to move out of the U.S. and set up an offshore base with a more friendly environment – something that has already happened in North America, and could be even more harmful if businesses continue to look elsewhere…