Operation Chokepoint: Federal Reserve Advances Proposal to End Crypto Debanking

The Federal Reserve has advanced its proposal to end crypto debanking by starting a 2-month comment period on a proposed rule on bank supervision. This is the strongest move yet in a policy change that crypto supporters claim will put Operation Chokepoint 2.0 to rest.

Federal Reserve Seeks Public Feedback to End Operation Chokepoint 2.0

In a press release on Monday, the Fed stated that it is seeking comments on a proposal to make this law. The Fed has given a 60-day period for the submission of comments.

The Fed first started making changes in June last year, stating that it had told its supervisors to stop banks from pressuring clients to close accounts due to reputation risk. This means banks can only make decisions about clients based on financial risk management.

The Federal Reserve decision comes after an announcement last year that the term would no longer be a factor in bank supervision and would instead be replaced by a focus on “material financial risks.”

“We have heard troubling cases of debanking, where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses,” said Vice chair Michelle Bowman.

An example of this case was the debanking of the Trump family by JPMorgan. The President then sued the bank for $5 million in damages in response to what they termed a “political move.”

Operation Chokepoint 2.0 is a name that has been given to this case by crypto figures. This refers to what they saw as a coordinated attack by the Joe Biden-led US government and the banking community to deprive the crypto industry of access to traditional banking services.

The current US administration has made efforts to bring an end to debanking in crypto, as seen with the Federal Reserve. Trump initially worked on a draft order in August to call on bank regulators to investigate debanking allegations from the industry.

Senator Lummis Praises Fed Efforts to Stop Crypto Debanking

In an X post on Monday, Lummis appreciated the move, saying that the proposal is long overdue.

“It’s not the Fed’s role to play both judge and jury for banking digital asset companies,” she said. “Glad to see this important step to permanently remove ‘reputation risk’ from Fed policy and put Operation Chokepoint 2.0 to rest.”

Apart from the Federal Reserve’s move, the Senator has been pushing for policies to stop this. Last year, JPMorgan shut down the accounts of Jack Mallers, the CEO of the Bitcoin payment company Strike.

In response, Lummis criticized JPMorgan for failing to give a valid reason for shutting down the accounts, stating that they only found concerning activity in the routine checks.

Meanwhile, Alex Thorn, Galaxy Digital’s head of firmwide research, also hailed the move, stating that Operation Chokepoint 2.0 could be nearing an end.