03-18-2025 
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American legislators are advancing plans to ensure crypto operators retain access to banking services, even as those operators continue to cite evidence of ‘debanking’ that doesn’t actually exist.
- Senate committee advances ‘debanking’ legislation
- New ‘ChokePoint 2.0’ docs disappoint (again)
- Crypto, big tech cheer CFPB defanging
- Crypto bros find victory hollow without revenge
On March 13, the Senate Banking Committee voted to advance the Financial Integrity and Regulation Management Act (FIRM) introduced on March 6 by committee chair Sen. Tim Scott (R-SC). The Act’s stated purpose is to “curtail the weaponization of federal banking agencies by eliminating reputational risk as a component of the supervision of depository institutions.”
This alleged weaponization lies at the heart of Operation Choke Point 2.0, the conspiracy theory beloved of crypto bros and other Silicon Valley elites who claim they were unlawfully denied access to banking services.
The said services were allegedly denied due to regulators’ alleged desire to kill undesirable technological innovations in their cradles. This reportedly led regulators to pressure banks to purge their client lists of these innovators, thereby preventing the world from advancing out of the financial dark ages.
Scott’s opening remarks left no doubt as to whether he believed crypto’s persecution claims had merit, saying, “The digital asset community–and, more importantly, American consumers–deserve clarity.” FIRM would prevent federal agencies from restricting access to financial services “simply because they disapprove of a customer’s politics, business, or industry.” Scott called this “simply un-American” and said banks should “make decisions based on financial risk–not political preference.”
FIRM was approved on a strict party-line vote, with all Republican committee members in favor and all Democrats opposed. Before the vote, Dems offered several proposed amendments, all of which failed along the same party line votes. Scott appeared to mock Dems’ concerns, saying they’d “taken their time walking to the table on this one” while expressing the opinion that FIRM will “ultimately be a bipartisan piece of legislation.”
Before the vote, Sen. Jack Reed (D-RI) proposed a pair of amendments, both of which sought different ways to preserve banking regulators’ ability to at least consider an individual/entity’s reputation when deciding whether a bank should accept them as a client. Reed pointed out that reputational risk equates to financial risk, and thus, eliminating the concept entirely was, er, dumb. Chairman Scott rejected Reed’s suggestions.
Scott called FIRM a “first step” in a process that will see other “really good bills”—including the Fair Access to Banking Act introduced by Sen. Kevin Cramer (R-ND) in February—come before the committee. Now, if crypto can just refrain from using its newfound banking access to crash the U.S. economy until then…
Is there a point to Choke Point theory?
The Federal Deposit Insurance Corporation (FDIC) was among the crypto sector’s biggest banking bête noires, but a lot has changed since President Donald Trump was sworn in this January. Acting FDIC chairman Travis Hill almost immediately let crypto operators know that, under his watch, the FDIC was “actively reevaluating our supervisory approach to crypto-related activities.”
This new approach includes opening up the FDIC archives to expose the regulator’s alleged pressuring of banks to debank crypto clients. A group hired by the Coinbase (NASDAQ: COIN) exchange has filed Freedom of Information Act (FOIA) requests seeking all documents/communications between federal agencies and banks that were either looking to do business with crypto clients or to launch their own crypto-related services.
But context matters. Most of this correspondence occurred as the crypto market was undergoing its late 2022/early 2023 meltdown following a series of bankruptcies, frauds and other scandals. In March 2023, a string of bank failures—all of them with close ties to crypto operators—forced the FDIC to spend billions bailing out many of these same operators who now claim to be victims of FDIC overreach.
Each batch of documents released by the FDIC has brought loud ‘we told you so’ proclamations from crypto operators who allegedly suffered at the hands of FDIC-intimidated bankers. But while there’s plenty of smoke, there has yet to be anything an unbiased observer would call a smoking gun. Instead, only government agencies are urging caution and requesting more information from the banks.
March 14 brought yet another FDIC ‘debanking’ document dump, but here again, there are no ‘cease & desist’ orders, merely questions, like why are you partnering with an entity that lacks a money service business license?
Regardless, crypto advocates—including Caitlin Long, whose Wyoming-based crypto-friendly Custodia Bank has waged a long legal fight over access to Federal Reserve master accounts—claim that answering FDIC questions “probably” cost these banks “hundreds of thousands of dollars in legal fees.” Long suggested these information requests were “burying a bank in red tape designed to make the bank quit innovating.”
Again, context matters. Consider the FDIC’s desire to protect the broader banking sector, given the fact that the three banks that fully embraced crypto had all failed. In that situation, you might want a regulator to take a little more time examining banks’ dealings with crypto operators, most of whom defined due diligence as getting an email from another crypto operator who claimed he was ‘totally good for it, bro.’Crypto celebrates CFPB’s demise
In February, the Trump administration began dismantling the Consumer Financial Protection Bureau (CFPB), a federal agency tasked with having consumers’ backs in their dealings with financial institutions. Those institutions include banks, credit unions, payday lenders, debt collectors and, yes, digital asset exchanges.
Shortly after being appointed, acting CFPB director Russel Vought told CFPB staff to “cease all supervision and examination activity” and to halt any enforcement actions. Crypto bros were quick to celebrate the news, with Coinbase CEO Brian Armstrong calling it “100% the right call” and declaring the CFBP to be “unconstitutional on the face of it.”
This tweet was immediately slapped with a community note directing Armstrong to the U.S. Supreme Court’s 2024 ruling upholding the constitutionality of the CFPB, with the majority decision written by hardcore conservative Justice Clarence Thomas.
Other X users pointed out that nearly 8,000 complaints against Coinbase had been filed with the CFPB since the exchange’s 2011 launch. That compares with just 512 complaints against rival exchange Gemini (which launched in 2014) and 314 complaints against Kraken (which launched in 2013), although Coinbase’s customer base significantly exceeds that of both its primary U.S. rivals.
Many complaints against Coinbase involve the exchange’s annoying habit of freezing accounts and leaving customers hanging about what they’d done wrong and how to remedy the situation. Others noted how Coinbase only took action to fix their problems after they filed a CFPB complaint.
Here again, the reactionary self-preservation of the crypto bros shows its unappealing face. They demand ‘regulatory clarity’ yet reject any and all regulatory efforts that cost them money. They even cheered on the CFPB’s neutering despite the fact that the CFPB was squarely on their side when it came to the issue of debanking.
On March 5, the Senate voted to repeal a Biden-era rule that gave the CFPB oversight of digital payment apps (Apple Pay [NASDAQ: AAPL], Google Pay [NASDAQ: GOOGL], Venmo, Cash App, etc.). The CFPB originally wanted to include digital assets in that oversight but ultimately exempted them from the rule following public feedback.
The CFPB rule included prohibiting digital payment apps from denying individuals access to services based on ideological grounds. This means that the same senators who insist that debanking is ‘unAmerican’ were effectively voting to allow payment apps to debank Americans.
And the same crypto operators who claim to have suffered the tortures of the damned as a result of being debanked, cheered the CFPB’s gelding. Because the real goal here isn’t anything to do with ‘debanking,’ it’s about eliminating nearly all oversight of the digital asset sector while ensuring the big bad federal government will still be there should another bailout be required.
It’s not enough that I succeed; others must fail
Crypto bros are proving to have long memories when it comes to regulators that dare try to rein in crypto excesses, even when those attempts are thwarted. Politico recently reported on the ‘Italian vendetta’ being waged by digital asset operators like Coinbase, Gemini, Ripple Labs and others against federal agencies like the Securities and Exchange Commission (SEC).
While the new leadership of the SEC has dismissed nearly all of the suits brought against digital asset operators under its previous leaders, that appears insufficient for some of those who won reprieves. Coinbase and Ripple execs have suggested the crypto sector refuse to do business with any law firm that hires attorneys involved in the SEC’s anti-crypto campaigns, while Gemini co-founders Cameron and Tyler Winklevoss have called for the public naming, shaming and firing of anyone involved.
The level of vitriol has become so excessive that SEC Commissioner Hester ‘Crypto Mom’ Peirce felt the need to point out that enforcement decisions “are made at the commission level … when we make bad decisions, the blame lies on us. It doesn’t lie on the staff … They report to the chairman. They are supposed to follow the policy direction that they’re getting from the commission.”
Former SEC Enforcement Director Josh McLucas echoed these concerns, telling Politico: “You’re penalizing people who were basically doing their jobs … singling out lawyers and saying, ‘We want their names out there, we want them labeled as pariahs’—I’ve never seen anything like it.”
One unidentified crypto industry official told Politico the rhetoric was getting out of hand. “Where’s the goddamn offramp? You got Gary Gensler’s scalp. There’s not that many other people you can go after.” An unidentified former SEC official called the industry’s attacks “grave dancing.”
Corey Frayer, a former Gensler adviser, said it is “very telling that crypto leaders who are very wealthy and already very influential in Washington are still so insecure that they need to punch down at agency staff who can’t defend themselves.”
Related Reads:
- Choke Point 2.0: Fact or fiction, crypto banking access set to change
- New FDIC docs show Choke Point 2.0 more fantasy than conspiracy
- Reversal of digital asset debanking picks up pace in the US
Watch: Bringing the Metanet to life with Teranode
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