Newly Released FDIC Letters Show Operation Choke Point 2.0 In Action

Another piece of Operation Choke Point 2.0 came into view today as Coinbase Chief Legal Officer Paul Grewal released a trove of letters showing just how the government shut down 25 attempts by banks to offer bitcoin and blockchain services in 2022 and 2023.

While all names are redacted, newly released letters from the Federal Deposit Insurance Corporation (FDIC), a primary bank regulator, show a pattern of stomping on efforts to innovate with cryptocurrency and blockchain offerings under what the crypto community is calling Operation Choke Point 2.0

“It took a Court order but you can now read them for yourself,” Grewal said on X. “They show a coordinated effort to stop a wide variety of crypto activity — everything from basic BTC transactions to more complex offerings.”

As a group, the letters offer hard evidence that Operation Choke Point 2.0 was real, and that regulators were pressuring banks to back off of any experimentation with crypto and blockchain.

The biggest, or at least the most visible impact of the regulatory campaign came in early 2023, when the three banks most closely associated with the crypto industry, Silvergate, Silicon Valley Bank and Signature bank were shut down.

In Silvergate’s bankruptcy filing in September, Elaine Hetrick, the former chief administrative officer of Silvergate Capital Corporation, said it became clear that regulatory “agencies would not tolerate banks with significant concentrations of digital asset customers, ultimately preventing Silvergate bank from continuing its digital asset-focused business model.”

Hard Evidence

In an X thread, Castle Island Ventures Founding Partner Nic Carter said that a lot of the programs mentioned in the letters “pertain to buy/sell/hold BTC products offered through banks’ mobile and online banking interfaces… so the FDIC was trying to inhibit retail access to BTC.”

But other experiments never got off the ground, including a “closed-loop blockchain-based payments system between clients,” permissioned stablecoin issuance, issuing bitcoin-backed rewards debit cards, and of course “onboarding of ‘ecosystem’ firms as clients,” Carter added.

Early last month, incoming Trump administration AI and Crypto Czar David Sacks called out Operation Chokepoint 2.0, saying, “There are too many stories of people being hurt by Operation Choke Point 2.0. It needs to be looked at.”

A flood of those stories poured out after a16z’s Marc Andreessen discussed the individual and business debankings experienced under Operation Choke Point 2.0 on Joe Rogan’s podcast.

Some 30 prominent crypto insiders shared stories, including Kraken founder Jesse Powell and Tyler Winklevoss, cofounder of the Gemini exchange.

“I was debanked because I’m in crypto, as was @Gemini,” wrote Winklevoss on X. “They also assassinated several banks because they banked crypto companies.

While a flood of complaints came after Andreessen’s appearance on The Joe Rogan Experience, they are nothing new. Back in 2019, Powell revealed that he had been debanked and almost lost everything.

“Paypal locked up all the money I had for 6 months, almost lost my business/apartment,” he said on Twitter. “BofA killed @Krakenfx's payroll account on 30 days notice,” Powell said. “Chase killed it on 5 days notice, by mail, which arrived after the account was closed. Found out when employee checks bounced.”