Operation Choke Point: House Republicans Spotlight Biden Administration’s ‘Attack on Crypto’

A new congressional report from Representative French Hill makes several allegations against federal regulators. It claims they restricted the U.S. crypto industry through actions resembling a revived Operation Choke Point. 

The document claims that agencies used unclear rules and informal pressure. The report also points to forceful enforcement efforts. These actions caused more than 30 digital asset firms and individuals to lose banking access. 

Operation Choke Point Parallels Emerge in Banking Oversight

Among the findings, committee staff described a culture of caution that shaped how banks dealt with clients involved in digital assets. Their account  underscores a pattern of regulators sounding the warning to institutions that thought about serving crypto firms. In such a scenario, banks limited exposures in order to minimize potential supervisory implications.

Hill connects these findings to the work on digital asset policy happening in Congress now. His work on federal crypto market legislation has made him a central figure in the debate. The report contends that the moves are similar to the Obama administration’s Operation Choke Point. 

The initial program was aimed at businesses like payday lenders and ATM operators. It generated strong bipartisan criticism. Lawmakers subsequently pushed regulators not to sway decisions involving lawful businesses.

The latest study deals with the effect of regulatory warnings on the crypto industry. Committee staff describe conflicting guidance that left institutions without clear standards.  Crypto rules in this period were uncertain.

Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil agreed with the findings. His comments highlight the costs to innovation and industry jobs. He contended that access to banking became an issue tied up with the regulators’ decisions, rather than whether these firms were legal.

Growing Strain on Crypto Oversight

The report also looks back at the Securities and Exchange Commission’s reliance on enforcement actions in previous stages of crypto policy. That policy, the document said, led to a lack of certainty for businesses in the industry. The report also analyses restrictions by banking agencies, such as the Federal Reserve, that hindered institutional participation in digital asset activity.

Regulators regularly cautioned banks about the volatility in the crypto market. A number of high-profile failures and fraud cases in 2022 raised the profile of the sector. These developments informed supervisory worries and how firms interacted with digital asset companies.

Over the course of Biden’s four years in office, Bitcoin fluctuated widely—rising from nearly $34,000 to about $94,000, yet dipping under $17,000 toward the end of 2022. In 2023, a few banks heavily involved in the crypto space also collapsed. Earlier this year, Bitcoin surged to a new peak above $126,000. But it later experienced a sharp downturn, settling near $84,000 at the start of this week.

Digital asset laws being pushed by congress in the midst of this. The first national stablecoin law was adopted by lawmakers. The House also passed a broader market structure bill awaiting action in the Senate.

Hill’s report focuses on actions by Trump-era regulators, who withdrew a series of supervisory and interpretive documents issued under the Biden administration. These reversals, committee staff argue, make it less likely that there will be further debanking of digital asset businesses.