In 2023, the crypto world faced a major shakeup. Anchorage Digital, a prominent crypto company, suddenly found itself without a bank. One day, their bank account was there, the next, it was gone. No warning, no explanation. This wasn't an isolated incident. Many crypto firms faced the same issue, a situation they dubbed "Operation Choke Point 2. 0. "

The crypto industry believes this was a coordinated effort by regulators to pressure banks into cutting ties with crypto firms. They compare it to a similar situation during the Obama administration, where banks backing gun manufacturers and payday lenders were targeted. This time, the focus was on crypto.

The crypto industry has found unexpected allies in top Republicans. They are eager to investigate any wrongdoing that may have occurred when Democrats were in charge. President Donald Trump has jumped on this bandwagon, accusing major banks of politically motivated debanking. He claims that these banks have shut out conservatives under pressure from regulators. However, the banks deny these claims, and Trump hasn't provided any evidence to support his accusations.

Senator Rick Scott, a close ally of Trump and chairman of the Senate Banking Committee, echoed these sentiments during a hearing. He expressed concern about financial institutions cutting off services to digital asset firms, political figures, and conservative-aligned businesses and individuals.

For crypto leaders like Nathan McCauley, this has provided a platform to voice their grievances. McCauley, whose company is a federally chartered crypto bank, recounted Anchorage's abrupt loss of banking services in June 2023. He highlighted the challenges faced by smaller startups, who may not have the resources to keep their bank accounts open.

The high-profile hearings early in Trump's second administration underscore the sudden influence of the crypto industry. They were instrumental in getting their favored candidates elected across the country in November. Crypto exchange Coinbase was one of the top corporate donors in the 2024 election cycle, giving more than $75 million to a group called Fairshake and its affiliate PACs. Ripple doled out around $50 million. Coinbase and Ripple were both involved in protracted legal battles with the SEC under former Chairman Gary Gensler.

Trump is returning the favor in various ways. His executive order on crypto promises "fair and open access" to financial services. He appointed venture capitalist David Sacks, a longtime ally of Elon Musk, as the White House's first AI and crypto czar. Meanwhile, the SEC has signaled a rollback of rules that previously kept banks from holding bitcoin on their balance sheets, and the FDIC is under pressure to revise guidelines that made it harder for banks to serve digital asset companies.

The FDIC released hundreds of pages of internal records obtained through Freedom of Information Act (FOIA) requests. The documents show that the regulator sent "pause letters, " urging banks to rethink their relationships with crypto clients. Nic Carter, founder of Castle Island Ventures, said the FDIC records show that banks were being pressured to avoid crypto clients even in the absence of clear laws.

The closure of Silvergate Bank and Signature Bank in 2023, following the meltdown at Sam Bankman Fried's FTX, caught the ire of crypto investors. Silvergate and Signature were the leading FDIC-insured banks for crypto firms. Silvergate Capital, the bank's parent, acknowledged in its bankruptcy filing last year that there had been a "rapid contraction" of its business in early 2023, but said it had "stabilized" and was able to "meet regulatory capital requirements" and "had the capability to continue to serve its customers. " Silvergate attributed its insolvency to "increased supervisory pressure on Silvergate and other banks focused on servicing crypto-asset businesses. " Signature Bank was seized by regulators in March 2023. Former Democratic Congressman Barney Frank, a Signature board member, claimed that the FDIC shut it down specifically "to send a very strong anti-crypto message. " The FDIC arranged a sale of Signature's assets, excluding $4 billion in crypto-related deposits.

The crypto industry at large is rallying around the message that the federal government is finally changing course after four years of vilifying cryptocurrencies. However, many in Congress are focused on making the case that banks were targeting conservatives for their political views. Carter said lawmakers are trying to reach a wider audience because "most regular folks don't care about crypto. " He believes this was a political choice made by Congress and the administration to tack on the conservative angle, making it an issue with broader appeal.

For Trump, there's more to gain from crypto than just political points. There's potentially lots of money involved. Before he was even back in office, Trump and First Lady Melania Trump had already launched meme coins that instantly added billions of dollars in paper value to the family's net worth, in addition to the tens of millions of dollars the projects earned in trading fees. A week into his term, Trump launched Truth. Fi, a financial arm of Trump Media, promising ETFs, cryptocurrency investments, and "Patriot Economy" assets — all custodied with $250 million at Charles Schwab. Musk, meanwhile, is at the center of the Trump administration and has his own project underway. He's positioning his social media platform X as an alternative online bank, enabling users to move funds between traditional bank accounts and their digital wallets to make instant peer-to-peer payments.

The good vibes are being expressed across the industry. "It's a brand new day for crypto in America, " said David Marcus, the former head of crypto at Meta and current CEO of infrastructure startup Lightspark, in an interview with CNBC's "Squawk Box" last week. What's happening under Trump, he said, is "quite a polarity flip of atmosphere and energy for our entire industry. "

Crypto Chaos: Banks vs. Crypto Firms

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