The U.S government has begun its Crackdown on cryptocurrency as you watch This video Regulators of all kinds are Reigning in crypto projects protocols And companies this coordinated Crackdown Is being called operation choke point 2 By the crypto Community the term was Coined by Castle Island Ventures partner Nick Carter who was the first to sound The alarm so today I'm going to tell you Everything you need to know about Operation choke point 2 reveal which Projects protocols and companies are at Risk and when this Crackdown on crypto Could end I'll start by saying that some of the Information in this video comes from an Article Nick published late last week The article is titled quote operation Choke point 2 is underway and crypto is In its crosshairs a link to the article Will be in the description along with a Few other important resources Now for those unfamiliar the original Operation choke point was a coordinated Crackdown on companies considered to be High risk by U.S Regulators this was Done indirectly by pressuring the Banking sector to stop doing business With companies in certain industries Even if those companies were operating Legally The original operation choke point began In 2013 and many companies related to
Firearms drugs loans and other such Categories lost access to banking Services in the USA now choke point was Controversial mainly because it was Never formally voted on by U.S Politicians it was a rogue operation of Sorts the origin of operation Chokeepoint is believed to be the United States Department of Justice or doj Allegedly acting on the orders of then President Barack Obama however there's Evidence to suggest that the real origin Of operation chokeepoint was the Consumer Financial Protection Bureau or Cfpb The cfpb was first proposed by Elizabeth Warren way back in 2007. if that name Sounds familiar that's because Elizabeth Is famous for being the most anti-crypto Politician in the United States and Possibly the entire universe Elizabeth's cfpb became a reality with The passing of the infamous Dodd-Frank Act in 2010. if you watched our video About Michael Barr you'll know that he Was the architect of the Dodd-Frank Act And also happens to be extremely Anti-crypto you'll also note that the Dodd-Frank Act included the creation of A new supervisor position at the Federal Reserve which Michael now coincidentally Holds What's interesting is that operation Choke point is believed to be the reason
Why crypto companies had such a hard Time getting access to banking services In the early days this is because the Operation happened while crypto was Seeing its first wave of growth and Adoption in the early to mid-2010s as Nick explains in his article the Inability of the crypto industry to Access onshore banking services quickly Led to the rise of offshore Alternatives Notably tethers usdt stablecoin Operation choke point was ended in 2017 By then president Donald Trump but the Banking discrimination continued Nick Points out that Banks were pressured to Stop working with oil companies in late 2017 and with Firearms companies in 2018. he also points out that some U.S Politicians were encouraging more Banking discrimination for specific Industries in 2019. As for cryptocurrency banking services In the United States temporarily Improved in mid-2020 when the office of The Comptroller of the currency or OCC Allowed federally regulated Banks to Custody crypto now I remember this Headline well and I reckon it was one of The key catalysts for the crypto bull Market not surprisingly the OCC chair Who gave the green light was Brian Brooks who had previously been Coinbase's Chief legal officer under Brian's rule the OCC introduced another
Positive banking provision in late 2020 Which required Banks to provide Fair Access to banking services for all Customers unfortunately Brian left the Agency in January 2021 and just a few Days later the OCC put a pause on the Fair access rule Michael Sue became the Acting OCC chair in mid-2021 and he Reportedly believes that crypto should Be cut off from the financial system Because it's a risk to financial Stability So this brings me to operation choke Point 2 which can be summarized as a Rogue operation by U.S Regulators to Make it difficult for crypto companies And crypto projects to get access to Banking services it's not entirely clear When operation choke point 2 began but My guess is sometime in early 2022. this Is because early 2022 is when JP Morgan Suddenly closed the bank account of uni Swap founder Hayden Adams in a reply to Hayden's tweet about it former cftc Commissioner Brian quintes said it was Because the fed and the OCC had been Instructed to pressure Banks to unbank Risky entities This begs the question of who gave the Instructions for this Crackdown and According to Nick the answer is the Biden Administration or more accurately The Democratic Party This wouldn't be all that surprising
Considering that the most anti-crypto Politicians are all Democrats by Contrast the most pro-crypto are Republican note that I'm not being Partisan here I think both sides suck This partisan stance is just something I've picked up from watching over a Dozen Congressional hearings about Cryptocurrency I'll leave a link to the Most recent crypto hearing we summarized In the description so you can see for Yourself Now even if operation choke point 2 Began in early 2022 it didn't seem to Affect the crypto industry much until Recently I suspect this is because the Anti-crypto US politicians were busy With the 2022 midterm elections there Also wasn't anything in the crypto Market they could use as justification Don't get me wrong the collapse of Terror the implosion of three arrows Capital and the insolvency of Celsius All attracted the attention of U.S Politicians the thing is that none of These three events involved Banks the First was a crypto the second was a Hedge fund and the third was a platform In early November 2022 the anti-crypto Politicians got their perfect Justification for the operation FTX and Alameda research now unlike prior crypto Calamities the collapse of FTX and Alameda affected silvergate a U.S Bank
Silvergate experienced a multi-billion Dollar Bank Run that it barely survived This ties into Nick's timeline of Operation choke point 2 which begins With a letter sent to silvergate on the 6th of December by Elizabeth Warren and Other anti-crypto politicians obviously The letter blasted silvergate for doing Business with high-risk companies like FTX and Alameda research the very next Day another crypto-friendly bank called Signature announced that it would be Cutting deposits from crypto customers In half in other words it would be Forcing its crypto customers to withdraw Their money and take it elsewhere and Possibly even shuttering some of their Accounts now the third of January this Year seems to have been the official Start of operation choke point 2. that's Because it was the day when the Federal Reserve the Federal Deposit Insurance Corporation or FDIC and the OCC put out A statement suggesting that Banks stop Holding crypto and stay away from crypto Customers a few days later silvergate And signature were downgraded by ratings Agencies for their crypto connections a Major New York City Bank also announced That it would be exiting the crypto Industry Moonstone Bank made the same Announcement and I'm surprised it didn't Get any scrutiny If you watched our video about sbf's
Secret Bank you'll know that Moonstone AKA Farmington was a federally Registered bank with some questionable Connections to the likes of tether and Jeffrey Epstein somehow Moonstone Escaped the same scrutiny some of the Other banks that were used by FTX and Alameda received Speaking of which two days later the Wall Street Journal reported that Silvergate and signature had both taken Loans from mortgage banks in the United States I imagine this headline was Intended to make the average American Think that the U.S housing market is at Risk because of the crypto Market At the end of January the FED introduced A new policy which would basically make It harder for crypto Banks to get off The ground at the state level the same Day the Biden Administration published a Cryptocurrency roadmap which recommended That Pension funds stay away from Cryptocurrency at the beginning of February the doj announced that it was Investigating silvergate over its Connections to FTX and Alameda naturally There was no mention of moonstone I Should note that silvergate provides Banking services for some of the largest Crypto companies including coinbase on That note binance also announced that it Would be indefinitely suspending USD Bank transfers to and from its exchange
This news came a few weeks after binance Had announced that its banking partner's Signature had limited USD transfers to And from the exchange to those worth More than 100k Then last week it was revealed that Paxos was under investigation by U.S Authorities this was bad news because Paxos issues the busd stablecoin used by Binance on Monday this week paxos Announced that it would stop issuing Busd but noted that it would continue to Allow redemptions until February 2024 as A cherry on top paxos is reportedly Being sued by the SEC which is alleging That the busd stablecoin is a security To be exact the SEC gave paxos something Called a Wells notice which says that It's intending to sue paxos now has 30 Days to tell the SEC why it shouldn't be Sued if you watched our first video About the sec's case against Ripple You'll know that 80 percent of Wells Notices end with a lawsuit regardless of The response put simply the SEC is going To sue paxos very soon at that point it Could be forced to stop offering the Busd stablecoin altogether but that's Not clear yet Now in retrospect this outcome was Predictable because Bloomberg had Published an article on the 10th of January questioning busd's reserves this Is also why the news about the Cantor
Fitzgerald and tether connection worries Me last week it was reported that the Wall Street firm managed 39 billion Dollars of tether's U.S government debt Portfolio Could this news prompt The Regulators to Issue notices to Cantor Fitzgerald they Are not a crypto company and hence have No interest in resisting such requests Could Regulators or prosecutors do the Unthinkable and seize tether's Bond Reserves well I hope not but nothing is Beyond the Realms of possibility under The current regime as they say absolute Power corrupts absolutely now before you Run off and convert all your usdt into Usdc you should know that usdc may not Be entirely safe either like paxos Circle is based in the United States and There's a chance it's facing similar Levels of scrutiny the market seems to Think so because the busd Crackdown Caused usdc to slip below its Peg then Again circle's connection to Blackrock Could keep it safe more about that in The description Anyways when it comes to which crypto Projects protocols and companies are Most at risk of being affected by Operation choke point two well the short Answer is all of them as Nick Underscored in his blog post the Fundamental purpose of this operation is To indirectly regulate offshore crypto
Entities as powerful as the United States is it can't crack down on crypto Projects protocols or companies which Exist outside of its jurisdiction or Rather in countries that are not U.S Allies however it can choke off their Access to banking services and that's Exactly what's happening now I mean it's Literally in the name How much operation choke point 2 affects The crypto industry ultimately depends On whether the United States is the only Country that applies this kind of Regulatory pressure that seems unlikely Considering that the U.S has significant Influence over International Organizations like the financial action Task force or fat F if you've watched Our videos about the fat F you'll know That it plans to kill cryptocurrency by Labeling anything crypto related as high Risk sounds familiar doesn't it Funnily enough any countries that don't Go along with the fat F find themselves Cut off from financial services this Means it's very likely that most of the Rest of the world could very well Introduce their own operation choke Point twos in the coming weeks and Months by then most of the damage would Have been done however because the United States Remains the largest market For cryptocurrency by a wide margin That said the Crackdown on crypto in the
US could create a massive incentive for Certain foreign countries to embrace Crypto despite pressure from the fat F And other such International Organizations some would say this trend Has already begun and it's one that will Accelerate due to geopolitical Rifts and A Crackdown on crypto in the US will Lead to more decentralization the only Crypto projects companies and protocols That will survive operation choke point 2 are those that can't be directly or Indirectly regulated the problem is that This list is not very long most cryptos Are centralized another problem is that The Crackdown on crypto in the US will Lead to even more centralization of the Already centralized aspects of Cryptocurrency stable coins are a great Example here Circle's usdc may be the last man Standing and that means every coin and Token will trade against it in the next Few years this is a scary thought and Not just because circle is backed by BlackRock Circle has actively been Exploring the possibility of developing A central bank digital currency or cbdc And the world economic forum and others Have been actively discussing the Possibility of a so-called synthetic Cbdc the idea that every cryptocurrency Could soon trade against a cbdc is Terrifying and yet it would be the
Perfect way for the people in power to Take control of the industry never mind That ethereum Creator Vitale buteran has Already admitted that Circle has the Power to decide future ethereum Forks Now the Silver Lining to this outcome if It indeed occurs is that it would Significantly increase the demand for a Truly decentralized stablecoin by this Point the crypto Market would be much Larger than it is now which means it Would be much easier to develop this Kind of stable coin from a financial and Manpower perspective however this all Assumes that operation choke point 2 Will continue and this seems unlikely For starters it's possible that U.S Politicians will introduce reasonable Crypto regulations sometime later this Year with some luck regulatory Clarity For crypto will make it impossible for The operation to keep going If no reasonable crypto regulation comes Around then the next date to jot down Will be the 2024 election recall that The original operation choke point was Axed by the Republican leadership in 2017. as Nick notes in his article a Republican Victory would mean the end to The second version in early 2025. That's almost two years from now but It's consistent with when the next Crypto bull market will be back in full Swing it also happens to be when central
Banks will be allowed to hold Cryptocurrency on their balance sheets You can learn more about that using the Link in the description now before you Get to Dan I'll remind you that the United States isn't the only country on The planet and it's certainly not the Only place where people buy crypto if You've been keeping up with the channel You'll know that the UK and EU will be Introducing crypto regulations in the Coming months if you've watched our Videos about those crypto regulations You'll know they're actually pretty damn Bullish in fact they suggest that Foreign jurisdictions are very eager to Import all the crypto projects protocols And companies that the US is in the Process of effectively exporting more Importantly the pro-crypto regulations In places like the UK and EU suggests They won't be introducing their own Operation choke point twos this is a Bigger deal than you think because it Simultaneously suggests these Jurisdictions aren't as eager to go Along with the us as they once were call Me crazy but I think this is due to a Combination of the war in Ukraine and The Not So subtle fight over renewable Energy resources the energy inflation And social issues caused by the war in Ukraine have been felt most by the UK And the EU and the US doesn't seem to
Care that is putting it lightly to add Insult to injury the Biden Administration recently passed the Deceptively titled inflation reduction Act which essentially lured all of the UK and eu's top renewable energy talent To the US with billions of dollars of Printed money that's right printing Billions will cause inflation to come Down in all seriousness if you watched Our video about online censorship it You'll know that the EU responded to the Inflation reduction act by passing the Digital markets act which does direct Damage to Big Tech it wouldn't surprise Me at all if the eu's pro-crypto stance Is a continuation of this subtle Retaliation against the US now in any Case it's clear that the crypto Market Has a couple of rough months ahead of it We may indeed see another leg lower in Prices but trust me when I say that it Won't last forever Crypto will come back eventually and I'm Confident we'll be back to much higher Levels by the halving that is early 2024 So mark your calendars
