The founder of crypto-friendly Custodia Bank, Caitlin Long, said regulators would “be playing Whack-a-Mole” with problems if they continued to suppress Bitcoin (BTC).
War on crypto
Recently, a spate of regulatory enforcement actions raised suspicions of a coordinated attack on the U.S. crypto industry. Most recently when the SEC served Coinbase a Wells Notice on March 22.
Bitcoin bull Anthony Pompliano described “Operation Chokepoint 2.0” as a program that bypasses laws and democratic due process to enforce political views. He conceded that there had been no official confirmation of such a program, nor did he expect acknowledgment of its existence from officials.
“It references an Obama-era program that used the banking system as a way to essentially implement political views or legislation without having to go through the legislative process.”
Former Federal Deposit Insurance Corporation (FDIC) chair, William Isaac — who served between 1981 and 1985 — said Operation Chokepoint (1.0) was not about countering fraud and protecting consumers. Instead, it was a proxy attack on industries “deemed undesirable.”
“To target entire industries deemed undesirable by putting regulatory pressure on the banks that serve them.”
Partner at Castle Island Ventures, Nic Carter, was the first to connect the dots. He said “a new Operation Choke Point type operation” has been in force since the start of 2023 — adding that it is a deliberate attempt to stifle the crypto industry.
“It is a well-coordinated effort to marginalize the industry and cut of its connectivity to the banking system – and it’s working.”
Custodia gets rejected
On January 27, Custodia Bank’s application to join the Federal Reserve System was rejected. Later that day, the Kansas City Fed denied Custodia’s master account application.
A master account enables access to the Fed wholesale payment network without needing a bank to act as an intermediary.
Speaking to Pompliano, Long said before the rejections, Custodia was told to withdraw its applications or they would be “voted down.” Similarly, the fact that the two rejections happened in quick succession is evidence of coordination, Long said.
Furthermore, since then, she pointed out the crypto industry has had a “blanketing” of enforcement actions — making it clear that Operation Chokepoint 2.0 is real.
“We’ve seen it with the actions against Paxos, actions against the stablecoin issuers, actions against Kraken between the IRS and SEC, most crypto exchanges got Wells Notices in early February.
Regulators can’t stop Bitcoin
Responding to Bitcoin “fixing this,” Long said despite the damage that has been done, recent BTC price spikes demonstrate authorities have no power to shut it down.
She said regulators and those pushing the anti-crypto agenda refuse to accept they will lose control over this. Instead of embracing change, they try to keep people stuck “on old technology.”
Fiat and crypto will co-exist, but by forcing U.S. crypto firms overseas, regulators are storing up problems for themselves in the long term, Long said.
“The sad thing is, by shoving it all offshore, they’re going to be playing Whack-a-Mole, and frankly, there are going to be exposures, probably through correspondent banks, that they didn’t know existed.”