After a16z co-founder Marc Andreessen discussed on Joe Rogan’s podcast that 30 founders were debanked over the past four years, various crypto executives have spoken out about what is being called “Operation Choke Point 2.0.”
Operation Choke Point 2.0 refers to the alleged targeted actions to disconnect crypto businesses from financial services amid heightened regulatory oversight in recent years. Operation Choke Point 1.0, a U.S. Department of Justice initiative from 2013, aimed to limit banking services for industries considered high-risk for fraud, such as payday lenders and firearms dealers.
Andreessen alleged that the government had pressured banks to close certain accounts connected to crypto and other industries, which, as private businesses, can choose who they want to have as customers.
“Remember the crypto thing [where] everyone got excited [about] NFTs and all that stuff, and then it just stopped,” Andreessen said. “The reason it stopped is because basically every crypto founder, every crypto startup, they either got debanked personally and forced out of the industry, or their company got debanked, and so it couldn't keep operating, or they got prosecuted, charged or they got threatened with being charged.”
Andreessen added that the Securities and Exchange Commission’s slew of Wells Notices issued to crypto firms during the current administration, including Uniswap Labs, Robinhood Crypto and OpenSea, informing them that enforcement action may be pending, also made it very difficult for these firms to maintain access to banking services or do business in general. “The SEC has been trying to kill the crypto industry under Biden, and this has been a big issue for us because we're the biggest crypto startup investor,” he said.
After Elon Musk posted on X referring to the interview and posing the question “Did you know that 30 tech founders were secretly debanked?” many in the crypto industry began sharing their own experiences.
“Yeap. That's my reality,” Tornado Cash co-founder Roman Storm said. On the same day as the interview, the U.S. Fifth Circuit of Appeals ruled that the Treasury Department’s Office of Foreign Assets Control (OFAC) overstepped its authority in sanctioning the cryptocurrency mixer, reversing a lower court decision. “Ironically, I was just debanked again today,” Storm added a day later. “I’ve lost count how many times it happened during the last 2,5 years.”
Caitlin Long, CEO of the Wyoming-chartered special purpose depository institution Custodia Bank, said that in her company’s case, she had witnessed repeated debanking. She also pointed to its pending lawsuit against the Federal Reserve, which denied Custodia’s application for membership in its banking system, the oral argument scheduled for the day after Trump’s inauguration on Jan. 20.
Gemini co-founder Tyler Winklevoss said that he was debanked because he works in the industry, as was the crypto exchange. “The number is probably much larger than 30, that's just in the a16z portfolio alone,” he added. “Between myself, @tyler, @winklevosscap and @Gemini we lost more bank accounts than you can count on two hands, fellow co-founder Cameron Winklevoss said.
“We had no U.S. banking for several years while one U.S. company enjoyed a monopoly secured by its heavyweight investors,” Kraken co-founder Jesse Powell claimed. “That singular bank was recently assassinated. We barely made it by focusing on Europe. Kraken has too many stories of clients and employees losing U.S. banking.”
In answer to Musk’s question, Coinbase CEO Brian Armstrong said he could confirm it was true. “It was one of the most unethical and un-American things that happened in the Biden administration,” Armstrong wrote, suggesting it was a major factor in the Democrats losing the election. “We're still collecting documents via FOIA requests, so hopefully the full story emerges of who was involved and whether they broke any laws.”
Following Trump’s win and with others in the industry speaking out, Frax Finance founder Sam Kazemian also shared his story for the first time. “Kept quiet about this for almost a year out of fear but since I'm in good company with @tyler @cameron @brian_armstrong @elonmusk now. Last December, I got a call from JPM saying ‘we have to close anyone's account that we know their primary source of income/wealth is crypto. This is directly from the top from Jamie. I'm really sorry.’”
Kazemian said he didn’t mention it before out of fear of losing access to his remaining banking and payment processor accounts by attracting attention to himself. “I had a close relationship with my banker so I assume 99% of people wouldn't even get that kind of transparency/explanation. It's real. It happened. Hopefully now it will soon be over.”
Among Trump’s many pledges to the crypto industry during the election campaign, two of them were shutting down the so-called Operation Choke Point 2.0 and establishing a more crypto-friendly regulatory framework.
Castle Island Ventures partner Nic Carter, who has written extensively on the subject, suggested that everyone in crypto has had their personal banking situation negatively impacted to some degree, recalling he was “derisked” from his own primary bank in 2016. “But what we're more focused on is the debanking of crypto startups in the U.S.,” he said. “I can attest to the fact that every single one of our ~100 portcos has dealt with it.”
A week after the U.S. elections, Carter claimed the Federal Deposit Insurance Corporation (FDIC) was still insisting on a 15% depository cap on banks serving crypto firms. “Trump needs to absolutely clean house,” he said. “It’s more than that, Nic. The FDIC and Fed are still pressuring banks to exit crypto entirely, as recently as 10 days ago,” Custodia's Long responded.
Others argued that the crypto industry was not being systematically targeted, noting that multiple companies are facing lawsuits for allegedly defrauding consumers, which has affected their banking access.
“Debanking is a huge issue, crypto scams are also a huge issue,” Human Rights Foundation Chief Strategy Officer Alex Gladstein said. “Probably important for the discourse to acknowledge both.”
The Block reached out to JPMorgan, the SEC, the Federal Reserve, the FDIC and the Biden administration for comment.
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