Last spring, Austin Federa was eyeing up a new property in Brooklyn, New York. After passing an initial round of vetting for a mortgage with HSBC, he put in an offer, eager to avoid getting beaten to the punch. But then the bank began to ask about his job.
Federa worked as head of strategy at the Solana Foundation, a nonprofit in the cryptocurrency industry, he told HSBC. That didn’t go down well: After repeated delays and back-and-forth, the bank said it would grant the mortgage only if Federa left his job, he claims.
Federa was dumbstruck: “The guy explicitly told me: ‘It’s because of crypto,’” he says. “How could I be a more attractive person to lend to as someone who is unemployed?” HSBC did not respond to a request for comment.
In crypto circles, tales of difficulties in securing loans, banking, and other ordinary financial services in the US are common. Multiple firms report being stonewalled by tens of different banks before finding one willing to provide a checking account; others say banks have closed their accounts at short notice, sometimes without giving a reason.
That’s a major problem: Without a banking partner, crypto firms cannot accept dollars in exchange for services, store funds raised from investors, nor pay employees or vendors. Their quest to build a peer-to-peer financial system free of rent-seeking intermediaries is dependent, inconveniently, on an accord with those same intermediaries—the banks.
Large US banks have been reluctant to do business with crypto firms for many years; in 2017, JP Morgan CEO Jamie Dimon described bitcoin as “fraud.” But during the Joe Biden administration, members of the industry—with crypto venture capitalist Nic Carter leading the chorus—began to cry conspiracy. The federal government was deliberately trying to destroy crypto businesses by surreptitiously cutting them out of the banking system, they claimed.
In the end, Federa managed to secure a mortgage with Citizens Bank, which he had been speaking to at the same time as HSBC. Though his friends were sympathetic, they were largely skeptical of the idea of a conspiracy to debank crypto. “They thought it must have been an anomaly,” says Federa.
However, under the Donald Trump administration, the debanking allegations are being taken seriously by Congress. In early February, both the House Committee on Financial Services and the Senate Banking Committee held separate hearings on the topic, at which crypto executives testified. The hearings mark the start of an inquiry into Operation Chokepoint 2.0, the term widely used to describe the alleged anti-crypto conspiracy, coined by Carter.
“Consider what happens when a bank refuses to provide services to your company at the direction of a bank regulator,” said Republican congressman French Hill, chair of the House Committee on Financial Services, at one of the hearings. “That is exactly what was happening under the Biden and Harris policy of Chokepoint 2.0, which nearly severed the digital asset ecosystem from financial institutions,” he alleged.
The term Operation Chokepoint was first used in reference to a program launched by the Barack Obama administration under which US officials were said to have pressured banks into severing ties with pornography, payday lending, and other disfavored industries. This time, the argument goes, crypto was in the crosshairs.
Specifically, the theory is that the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC), the agencies responsible for the stability of the US banking system, strong-armed banks into refusing to serve the crypto industry. They did so by issuing informal guidance, skirting the public consultation process required to instate formal policy, crypto figures have claimed.
In a joint statement issued in January 2023, in the wake of the spectacular collapse of crypto exchange FTX and various other crypto businesses, the three agencies claimed that crypto represented a “significant risk” for banks. “It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the agencies wrote, although they also made clear that US banks are “neither prohibited nor discouraged” from servicing crypto businesses. In additional statements issued around that time, both the banking regulators and White House further warned banks to limit their exposure to crypto.
In a statement to WIRED, Rodney Hood, acting comptroller of the currency said, “The OCC does not direct banks to open, close, or maintain individual accounts. Nor does the OCC recommend or encourage banks to engage in the wholesale termination of categories of customer accounts.”
The Federal Reserve declined to comment but pointed to statements made by its chairman, Jerome Powell, at a January press conference: “Banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks,” he said at the time. “We certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal.”
The FDIC did not respond to a request for comment.
Previously, crypto entrepreneurs have been reluctant to go public with tales of their debanking, partly to avoid being stigmatized and partly for fear of jeopardizing their new banking relationships, says Nick Neuman, CEO at crypto custody firm Casa. In 2021, Silicon Valley Bank informed Casa that it would close its bank account, which the company had held for three years. Neuman’s cofounder wanted to tweet about it, but he objected.
“You’re worried that if you talk about this publicly you’re going to flag yourself to the current banking relationship that you barely got by the skin of your teeth, then they are going to debank you too. You’re back to square zero,” says Neuman. “You’re in this mode where you’re hoping that nobody in the bank’s risk committee realizes that you’re a crypto business. You want to stay under the radar.”
Now that Donald Trump has assumed the White House, having vowed on the campaign trail to “immediately shut down Operation Chokepoint 2.0,” members of the industry feel emboldened. After the issue was mentioned by venture capitalist Marc Andreessen on the Joe Rogan podcast in December, they flooded X with war stories about their dealings with banks. “The tide had turned, and the new administration was clearly coming in and changing things,” says Neuman.
Few would now dispute that crypto businesses had trouble accessing financial services in the US—the anecdotes are too many. But it remains for Congress to firmly establish why. While Trump and other politicians have spoken in terms that imply the Operation Chokepoint 2.0 theory has been proven categorically, no smoking gun—whether documentary evidence or insider testimony—has yet emerged.
At the hearing held by the House Committee on Financial Services on February 6, the discussion returned repeatedly to 700 pages of documents released by the FDIC, partly in response to a request filed under the Freedom of Information Act by the crypto exchange Coinbase. The documents chronicle the FDIC’s communications with banks about crypto during the Biden presidency.
The document payload contains letters in which the FDIC directed banks to pause plans to provide various crypto-related services to clients. In other examples, the regulator posed long lists of questions to banks about their crypto activities.
There is no explicit instruction for banks to withhold or withdraw accounts from crypto businesses in the documents, but industry executives have argued that the impression given to banks of a general suspicion toward crypto at the FDIC had the same practical effect.
“The pause letters show that, over and over again, banks were subject not to regulation by examination but regulation by exhaustion,” said Paul Grewal, chief legal officer at Coinbase, in his testimony. “You had question after question raised.”
The perceived implication that the FDIC was likely to subject crypto-curious banks to heightened scrutiny was sufficient for financial institutions to decide that the hassle of working with crypto businesses was not worth the revenue they would bring in, others have claimed.
“These efforts make it uneconomic to serve the crypto industry. While there is no legal ban, there is a functional ban,” argued Austin Campbell, an adjunct professor at NYU Stern School of Business and CEO at the crypto payments company WSPN, in his testimony.
At a separate hearing held by the same congressional committee on February 12, proponents of the Operation Chokepoint 2.0 theory received the closest thing yet to confirmation of discrimination faced by crypto businesses, claims Caitlin Long, CEO at Custodia, a crypto-focused bank in an ongoing licensing dispute with the Federal Reserve.
“We are all struck at the number of complaints and the breadth of them … We are not telling banks that they can’t bank certain people or anything like that. But nonetheless we are hearing [that crypto companies are being refused bank accounts],” said Powell, chairman of the Federal Reserve, in his testimony. “I take at least some of it as real. We need to understand it and stop it from happening.”
However, not everyone believes that conspiracy is the most likely explanation for the caution or aversion toward crypto among banks.
“I don’t believe that there was any conspiracy,” says Mercedes Tunstall, a partner at the law firm Cadwalader, formerly an in-house lawyer at the Bank of America and HSBC. “You’ve got a real concern about money laundering, fraud, and terrorist financing occurring with cryptocurrency.”
After FTX collapsed amid allegations of fraud, says Tunstall, the banks had particular reason for limiting the number of crypto clients they worked with: Both to protect themselves from the reputational risk associated with providing services to a company later revealed to be fraudulent and the operational risk tied to the possibility that other crypto businesses might become casualties in the FTX fallout.
“The banking industry is very gossipy,” says Tunstall. “I think there was maybe a crowd mentality driving [the unwillingness to work with crypto businesses] but not anything more nefarious than that.”
Nevertheless, crypto figures are using this opportunity to call for various reforms. During the hearing held by the House Committee on Financial Services, Campbell recommended that banks be required to provide a written justification to any client whose account they intend to close, and that banking regulators should be permitted to deliver guidance only in writing, never verbally.
Others are baying for Congress to name the individuals involved in the alleged Operation Chokepoint 2.0 plot. “The truth is going to come out,” Long told WIRED in an interview late last year. “If they follow through [with the investigation,] a lot of faceless bureaucrats’ names will be out there.”
But irrespective of whether Congress unearths a genuine conspiracy, the very existence of an investigation is already making a difference, Federa claims.
In November, Federa left the Solana Foundation to launch DoubleZero, a new crypto venture incorporated in the Cayman Islands. Initially, the organization was turned away by a range of US banks. But two of those banks have since agreed to supply DoubleZero with an account, Federa claims, after a sudden change in policy.
“The last thing anyone building a company wants to worry about is banking. But for years there was no other option,” says Federa. “Something has changed—and that change is good. If the political process wants to assign repercussions, Godspeed. But hopefully this is something I never have to think about again.”
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