Are Crypto Banks In Danger? FDIC ‘Pause Letters’ Spark Fears Of Operation Chokepoint 2.0

Operation Chokepoint Revisited

In the wake of the FDIC's recent issuance of "pause letters" to several crypto banks, concerns have been raised about the potential for a resurgence of Operation Chokepoint, a controversial Obama-era initiative that targeted businesses deemed to be high-risk by traditional banks.

Operation Chokepoint, which was officially discontinued in 2017, involved the Justice Department and federal banking regulators pressuring banks to cut off ties with certain businesses, including payday lenders, gun sellers, and online gambling operations.

Crypto Banks: The New Target?

Critics argue that the FDIC's pause letters, which request additional information from crypto banks about their operations and risk management practices, are a sign that the government is preparing to implement a similar crackdown on the cryptocurrency industry.

They point to the fact that several of the banks that received pause letters have been accused of engaging in risky practices, such as lending to unbanked customers and facilitating transactions for cryptocurrency exchanges.

Industry Response

The cryptocurrency industry has reacted with alarm to the news of the FDIC's pause letters. Many industry leaders believe that the government is unfairly targeting crypto banks and that the pause letters are an attempt to stifle innovation in the cryptocurrency space.

They argue that crypto banks play a vital role in the cryptocurrency ecosystem by providing essential services to businesses and consumers, and that a crackdown on these banks would harm the entire industry.

What's Next?

It remains to be seen whether the FDIC's pause letters will lead to a full-blown Operation Chokepoint 2.0. However, the cryptocurrency industry is clearly on notice that the government is paying close attention to the activities of crypto banks.

In the meantime, crypto banks are likely to face increased scrutiny from regulators, and they may need to make changes to their operations in order to comply with new regulations.