The Biden administration’s “Operation Chokepoint” was a controversial effort to essentially shut down the crypto industry by cutting it off from banks. Let’s break down what happened and how Trump reversed it.
What Was Operation Chokepoint?
Venture capitalist Nic Carter exposed Operation Chokepoint in 2023, revealing a coordinated campaign to squeeze crypto businesses out of the banking system. Regulators pressured banks to stop serving crypto firms, leading to some high-profile casualties.
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Big Names Affected: Crypto founders like the Winklevoss twins, Roman Storm, and Jesse Powell faced difficulties. Even Elon Musk revealed that dozens of tech founders were secretly “debanked.”
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Banks Targeted: Banks like Silvergate, Signature, and Silicon Valley Bank were also hit hard. They were forced to choose between serving crypto clients and facing regulatory pressure. Carter argued that Silvergate’s closure wasn’t due to insolvency, but rather to the pressure from Operation Chokepoint.
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Political Motivation: Senator Elizabeth Warren’s actions against Silvergate after the FTX collapse are cited as an example of the political pressure at play.
Trump’s Response and Executive Order
Even Donald Trump experienced the effects of Operation Chokepoint, with JPMorgan and Bank of America reportedly rejecting his deposits. This personal experience, he claimed, fueled his promise to end the practice if elected.
True to his word, President Trump signed an executive order aimed at ending Operation Chokepoint. The order specifically called out the misuse of regulatory power to unfairly target businesses. It directed federal banking regulators to remove any guidance that allows for politically motivated or unlawful debanking within six months. The Federal Reserve had already taken steps in this direction prior to the executive order.
In short, Trump’s executive order aims to prevent regulators from using “reputational risk” as a pretext to unfairly target specific industries or individuals. This is a significant win for those who believe Operation Chokepoint was an overreach of regulatory power and unfairly stifled innovation in the crypto space.