- Lawmakers investigate claims of Biden regulators isolating crypto firms under “Operation Choke Point 2.0.”
- Whistleblowers allege FDIC destroyed evidence; Senator Lummis demands preservation of records.
- Senator Tim Scott schedules Feb. 5 hearing, calling alleged actions “un-American.”
The United States Congress has initiated an investigation into claims that financial regulators under the Biden administration have abused their powers to isolate cryptocurrency companies from banking services. In a statement released on Jan. 24, the Senate and House of Representatives said they are investigating allegations of wrongdoing that the crypto community has labeled as “Operation Choke Point 2.0.”
If proven, this alleged scheme will take on new dimensions, which might have serious ramifications for regulatory agencies. On February 5, Senator Tim Scott, Chairman of the Senate Banking Committee, announced a crypto-related hearing that vigorously denounced the supposed activities as “un-American.”
Under Operation Choke Point 2.0, Biden regulators abused their powers and forced financial institutions to choke off services from digital asset firms, political figures, and businesses aligned with the conservative movement,” Scott said. “This is unacceptable. As Chairman of the Senate Banking Committee, I look forward to working with President Trump, industry leaders, and members of both parties to stop these abuses.
FDIC Accused of Destroying Crypto Evidence
The Federal Deposit Insurance Corporation (FDIC) now finds itself in the spotlight after whistleblowers accused the agency of destroying evidence related to its crypto oversight. In a Jan. 16 letter, Senator Cynthia Lummis demanded FDIC Chair Marty Gruenberg preserve all documents tied to digital asset regulation since January 2022.
“These actions are illegal and unacceptable,” Senator Lummis wrote, accusing FDIC staff of being subjected to surveillance and legal threats to prevent whistleblowing. Lummis also emphasized that the Senate’s oversight authority extends to all relevant materials, even if classified as “confidential.”
Her letter specifically requested documentation on the FDIC’s oversight of banks such as Silvergate and Signature, two prominent crypto-friendly institutions that collapsed in 2023. Lummis also demanded inter-agency communications regarding enforcement actions against cryptocurrency firms.
“You must cease and desist the destruction of materials immediately,” she warned, stressing that such actions could lead to criminal referrals to the Department of Justice.
According to Fox Business journalist Eleanor Terrett, representatives from major crypto entities such as Coinbase, Kraken, Uniswap, Lightspark, and venture capital firm Andreessen Horowitz (a16z) have been invited to participate in the upcoming hearing. Their testimonies are expected to shed light on whether regulators specifically targeted crypto businesses in a coordinated effort.
The term “Operation Choke Point 2.0” carries echoes of a similar Obama-era initiative aimed at “high-risk” industries, including payday lenders and firearms dealers. Digital asset advocates claim this supposed modern variant oversteps its brief in demonizing digital asset firms in the name of financial stability.
Trump vows to protect innovation in crypto
Former President Donald Trump has pledged to dismantle what he calls a “coordinated attack on innovation.” He stated, “The industry is being unfairly targeted. We’re putting an end to it.”
Meanwhile, Biden administration officials denied wrongdoing. Former White House Press Secretary Karine Jean-Pierre defended regulatory actions because they aimed only at combating fraud and ensuring financial stability.
This investigation could become the pivot point in how the crypto industry has engaged with US regulators. If true, charges may bring on added regulatory scrutiny for those same agencies, ultimately allowing crypto companies access to the financial services they need. A hearing on the issue should inspire a broad conversation on the role of government vis-а-vis balancing innovation with regulatory enforcement for this rapidly emerging technology sector.
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