Regulatory pressure pushes crypto companies abroad, sparking a conflict over policy

House Republicans Accuse Biden Administration of Targeting Crypto Banking Access

Republican lawmakers in the House have ramped up their investigation into federal agencies, alleging that the Biden administration is deliberately making it harder for cryptocurrency businesses and individuals to access traditional banking services. This initiative, which Republicans have dubbed "Operation Choke Point 2.0," is outlined in a recent report from the House Financial Services Committee and the Oversight Subcommittee.

The report points to actions by agencies such as the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, Office of the Comptroller of the Currency (OCC), and Securities and Exchange Commission (SEC), accusing them of introducing ambiguous regulations and additional hurdles. Critics argue these policies have hindered progress and innovation within the digital asset industry.

Impact on Crypto Businesses

According to the report, at least 30 cryptocurrency-related companies and individuals have experienced sudden account closures or received "pause letters" from banks, effectively severing their access to essential financial services. The FDIC reportedly instructed banks to reevaluate their relationships with crypto clients, while the SEC’s aggressive enforcement tactics have created a climate of uncertainty and caution throughout the sector.

One notable example is JPMorgan’s recent closure of accounts belonging to Strike CEO Jack Mallers, which has reignited concerns about anti-competitive behavior. Senator Cynthia Lummis has criticized this move, describing it as a continuation of "Operation Choke Point 2.0."

Legislative Efforts and Regulatory Shifts

In response, lawmakers are pushing for new legislation. The CLARITY Act, which passed the House in July 2024, seeks to provide straightforward regulatory guidelines for the crypto industry. The bill aims to move away from the SEC’s enforcement-centric approach and allow banks to work with digital assets without fear of punitive action. Senate Banking Committee Chair Tim Scott has expressed support for advancing the legislation by early 2026, though ongoing negotiations are complicated by competing proposals and concerns about conflicts of interest, including those linked to former President Trump’s involvement in crypto.

Potential Changes and Ongoing Challenges

Officials at the Federal Reserve and FDIC are reportedly reassessing previous guidance, suggesting a possible move toward greater integration of digital assets within the mainstream financial system. However, obstacles remain. A whistleblower has accused the FDIC of destroying documents related to "Operation Choke Point 2.0," raising serious concerns about transparency within the agency.

Global Repercussions

The effects of U.S. regulatory uncertainty are being felt worldwide. Exchanges in Europe and Asia have cited unclear American policies as a major obstacle to their expansion plans. Meanwhile, companies such as Ripple are looking to grow in regions with more transparent rules, like Singapore. The ongoing debate highlights the need to strike a balance between regulatory oversight and fostering innovation, as policymakers and industry leaders work to ensure that economic growth is not stifled by excessive restrictions.