Fed’s Operation Choke Point 2.0 Remains Firm Amid Enforcement Action on Crypto-Friendly Banks

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The US Federal Reserve has again tightened its grip on the crypto industry, targeting Customers Banks, a crypto-friendly bank. On August 8, the Fed took action against the bank, citing concerns over inadequate Anti-Money Laundering (AML) measures and risk management practices.

This decision has been met with strong reactions from crypto industry leaders, who now label it as another manifestation of “Operation Choke Point 2.0.“

Today, the Fed confirmed that Operation Choke Point 2.0 remains in full swing, provided valuable insight into how it works, and verified that the Harris crypto "reset" is a scam. The Fed revealed all of this in a 13-page enforcement action it issued this morning against… pic.twitter.com/zhLRRWAH0E

— Tyler Winklevoss (@tyler) August 9, 2024

For clarity, Operation Choke Point is a term the crypto community uses to describe US regulators oppressing the cryptocurrency industry using financial censorship measures.

Fed’s Crackdown on Digital Assets

Tyler Winklevoss, co-founder of the crypto exchange Gemini, was quick to voice his criticism of the Fed’s recent move. He said the action is part of a broader strategy to stifle the growth of crypto-friendly institutions.

He described this recent crackdown as continuing a long-standing pattern where US regulators use financial censorship to pressure crypto.

Winklevoss was not careful about his words when he accused the Harris administration of sending mixed signals. The administration claims to be fostering better relationships with the crypto sector while, at the same time, permitting actions like the Fed’s recent move, which seems aimed at curbing the industry’s growth. 

The Gemini co-founder referred to the administration’s supposed “crypto reset” as a disguise. His brother and fellow Gemini co-founder, Cameron Winklevoss, also weighed in on the situation, appreciating Customers Bank’s support for crypto despite the regulatory pressures.

In a message of solidarity, Cameron Winklevoss acknowledged the bank’s efforts and urged it to persevere through what he described as temporary adversity. He also said, “Your courage will not be forgotten.”

Dear @CustomersBank — thank you for banking crypto. We all owe you a debt of gratitude. Your courage will not be forgotten. Sorry you have to deal with this nonsense. But this too shall pass. Onward! https://t.co/sUg7B6kZp2

— Cameron Winklevoss (@cameron) August 9, 2024

Reactions from Industry Leaders

The crypto community’s frustration was further evident during a tense meeting at the White House. There, industry representatives engaged in heated discussions with Democratic leaders.

Reports indicate that National Economic Council Director Lael Brainard and US Deputy Secretary of the Treasury Wally Adeyemo were open to understanding the industry’s concerns. Nevertheless, this gesture of cooperation was met with skepticism from some quarters.

Also, Caitlin Long, founder of Custodia Bank, was particularly vocal in her criticism. She dismissed the meeting as unproductive and accused Brainard of playing a pivotal role in the ongoing suppression of crypto-friendly institutions.

I'M CALLING B.S. ON THIS: "That is very much seen as moving the ball forward," the source said [about today's White House #crypto meeting]. Both Brainard and Adeyemo were "very inquisitive," they added." BUT ACTIONS, NOT WORDS, FOLKS. Brainard threw @custodiabank under the bus… https://t.co/7ZPUHSLVx9

— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) August 9, 2024

Moreover, Long, who has consistently criticized what she sees as regulatory overreach, accused Brainard of undermining Custodia Bank during her time at the Federal Reserve. She also labeled the recent discussions as mere “theatrics.”

I don't doubt @RoKhanna or @WileyNickel sincerity either. Maybe they didn't know Lael Brainard was part of #OperationChokePoint2.0 before she left the Fed for the White House & has done NOTHING to stop it. Don't forget the WH was involved in @custodiabank's denial. It all stinks.

— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) August 2, 2024

Long’s frustration highlights a growing sentiment about the crypto regulatory outlook in the US. She called on the administration to take concrete actions to reverse the damage done by what she perceives as an arranged campaign against crypto.

Long emphasized that her skepticism about the administration’s crypto stance would remain until she sees a real change. She noted that if Brainard were to take meaningful action to address the concerns, she would be willing to reassess her position.