Operation Choke Point 2.0: The Biden Administration’s Efforts to Put Crypto in the Crosshairs

Digital Assets and Bank RegulationHouse Financial Services Subcommittee on Oversight and Investigations · February 6, 2025 · 119th Congress
The House Financial Services Subcommittee on Oversight and Investigations held this hearing to examine allegations that Biden administration banking regulators, particularly the FDIC, pressured banks to deny basic financial services to digital asset companies. Begins at ▶ 0:18:42
Transcript
Highlights

Title

Debanking of crypto firms under "Operation Choke Point 2.0"

Purpose

The House Financial Services Subcommittee on Oversight and Investigations held this hearing to examine allegations that Biden administration banking regulators, particularly the FDIC, pressured banks to deny basic financial services to digital asset companies. Witnesses from Better Markets, MARA, NYU Stern, and Coinbase testified about regulatory tactics, FOIA-obtained "pause letters," and proposed reforms, while Democrats used the hearing to raise concerns about crypto risk, financial inclusion, and Elon Musk's access to federal payment systems. Begins at▶ 0:18:42

Who spoke

• Chairman Bryan Steil (R-WI... actually chair Muser)▶ 0:18:42: Opened the hearing, framed it as a continuation of "Operation Choke Point," and said acting FDIC Chairman Travis Hill's document release showed banks were nearly universally rebuffed when seeking to serve crypto clients▶ 0:22:14.

• Rep. Al Green (D-TX), Ranking Member▶ 0:19:43: Argued "Operation Choke Point 2.0" is a misnomer for a program the Biden administration never formally initiated▶ 0:23:45; noted Silvergate and Signature Banks failed in part due to crypto concentration risk, with Silvergate's crypto deposits rising from 1% to over 98% of total deposits▶ 0:24:45; later criticized Trump's memecoin as lacking investor protections▶ 0:26:17; closed by saying he will "err on the side of regulating"▶ 1:55:25.

• Rep. French Hill (R-AR), Full Committee Chairman▶ 0:27:17: Said Operation Choke Point 2.0 nearly severed the digital asset ecosystem from banking and noted Coinbase was treated poorly by the SEC while FTX was not investigated▶ 0:27:49.

• Austin Campbell, Adjunct Professor, NYU Stern▶ 0:30:20: Explained the FDIC's CAMELS rating system lets the subjective "management" component be used to punish banks serving crypto clients▶ 0:32:22; proposed requiring written (not verbal) guidance, public disclosure, and abolishing reputational/management risk factors▶ 0:34:24.

• Paul Grewal, Chief Legal Officer, Coinbase [0:30:51... actually 0:35:25]: Said FDIC "pause letters" from 2022–2023 pressured banks to halt crypto activity with no risk analysis▶ 0:35:55; said Coinbase sued and obtained 175 documents/700+ pages showing this pattern▶ 0:37:56; noted the FDIC publicly denied discouraging banks from crypto while privately doing the opposite▶ 0:38:56.

• Fred Thiel, CEO, MARA▶ 0:40:27: Said MARA invested nearly $2 billion in the US economy in 2024▶ 0:41:27; testified MARA's account with Signature Bank was seized and a new bank asked it to withdraw $70 million six days after opening an account, with no explanation▶ 1:03:40.

• Shayna Olesiuk, Director of Banking Policy, Better Markets▶ 0:46:00: Said crypto-related bank failures cost $40 billion in direct costs▶ 0:48:01; cited FBI data of 69,000+ crypto fraud reports in 2023▶ 0:49:02; argued crypto firms often engage in illegal/risky conduct that justifies regulatory scrutiny▶ 0:47:31.

• Rep. Maxine Waters (D-CA), Ranking Member of Full Committee▶ 0:56:35: Pivoted to criticize Elon Musk's access to Treasury payment systems and DOGE-related actions, calling it an "illegal takeover"▶ 0:57:35.

• Rep. Ann Wagner (R-MO)▶ 1:02:09: Asked Thiel to confirm banks explicitly cut off crypto firms; Thiel confirmed Flagstar refused to take on MARA's crypto accounts after Signature's failure▶ 1:03:40; Campbell cited an AIMA study showing ~2/3 of crypto-focused asset managers had banking access problems versus almost none for traditional managers▶ 1:05:12.

• Rep. Rashida Tlaib (D-MI)▶ 1:07:44: Raised concerns about crypto scams harming constituents, including one losing $400,000▶ 1:09:14, and asked about discrimination against Muslim Americans in banking, citing a poll that over 1 in 4 report challenges▶ 1:09:44.

• Rep. Andy Barr... (not in transcript directly named, appears as unclear) — omitted, not confidently identified.

• Rep. Barry Moore/unclear (Georgia member questioning on non-objection letters)▶ 1:13:46: Asked Campbell to explain FDIC "supervisory non-objection letters" and argued they function as a de facto ban without changing the law▶ 1:14:46.

• Rep. Nikema Williams (D-GA)▶ 1:18:18: Redirected focus to Musk/DOGE concerns▶ 1:18:48; questioned Olesiuk on the racial wealth gap and banking discrimination in Atlanta, noting 11% of Black households remain unbanked versus 2% of white households▶ 1:22:51.

• Rep. Andrew Garbarino (R-NY)▶ 1:23:51: Asked Grewal about Coinbase's KYC/AML compliance, noting illicit crypto activity is estimated at only 0.34% of transactions▶ 1:23:51; had Thiel confirm no bank ever raised KYC/AML concerns before debanking MARA▶ 1:25:38.

• Rep. Laurel Lee/California member (Rep. Lard)▶ 1:27:39: Asked about CFPB's role and forward-looking solutions; asked Grewal whether the FDIC's Wednesday announcement withdrawing crypto guidance was sufficient▶ 1:31:41.

• Rep. Anna Paulina Luna / Florida freshman (Herod... unclear name, transcript shows "heropoulos")▶ 1:33:12: Asked Grewal to detail Coinbase's efforts to work with the SEC before being sued▶ 1:34:42.

• Rep. Tim Moore (R-NC)▶ 1:36:43: Cited that ~27-28% of Americans (roughly 90 million people) own or use crypto and argued regulators are stifling a legitimate industry▶ 1:37:44; asked Grewal about other countries being more welcoming to crypto innovation▶ 1:40:14.

• Rep. Warren Davidson (R-OH)▶ 1:41:45: Asked Grewal whether Signature Bank's seizure scared the industry; Grewal confirmed firms were "terrified"▶ 1:43:15; discussed the FDIC's use of reputational risk as a political tool▶ 1:46:17.

• Rep. Troy Downing (R-MT)▶ 1:47:18: Asked Thiel about MARA's plan to move 50% of revenue offshore due to the regulatory environment, confirmed two years ago▶ 1:48:49.

• Rep. Bryan Steil (R-WI), Chairman of Subcommittee on Digital Assets▶ 1:57:27: Used a "wet driveway" analogy to argue circumstantial evidence proves regulatory pressure occurred▶ 1:57:57; discussed reputational risk as a vehicle for political bias with Campbell and Grewal▶ 1:59:27.

Key moments

• Grewal said Coinbase's FOIA lawsuit forced release of 175 FDIC documents (700+ pages) showing regulators forced banks to deny stablecoin issuers accounts for reserves▶ 0:37:56▶ 0:38:26.

• Grewal contrasted the FDIC's public January 2023 joint statement claiming banks were "neither prohibited nor discouraged" from serving crypto customers with private pressure to halt such activity▶ 0:38:56.

• Campbell described the FDIC's CAMELS rating "management" component as a subjective tool that can single-handedly cap a bank's overall safety rating regardless of objective risk metrics▶ 0:33:24.

• Thiel testified MARA deposited $70 million with a new bank after Signature Bank's failure, only to be told six days later to withdraw all funds with no explanation because the bank would no longer serve crypto companies▶ 1:03:40▶ 1:04:10.

• Olesiuk cited $40 billion in direct costs from crypto-related bank failures and said only 8% of Americans view crypto positively per a CNBC poll▶ 0:48:01▶ 1:08:14.

• Davidson and Grewal discussed how Signature Bank's seizure, despite meeting solvency and regulatory obligations, "terrified" the industry and served as a warning to other banks▶ 1:43:15▶ 1:43:46.

• Rep. Waters shifted the hearing's focus to Elon Musk's access to Treasury payment systems, calling it an "illegal takeover" and citing concerns about Social Security and Medicare data▶ 0:57:35▶ 0:58:06.

• Rep. Green disputed the premise of the hearing, noting no Biden administration document explicitly names an "Operation Choke Point 2.0"▶ 1:51:50.

• Campbell cited an AIMA study finding roughly two-thirds of crypto-focused asset managers had banking access problems compared to almost none among traditional asset managers▶ 1:05:12▶ 1:05:42.

• Thiel said MARA publicly stated two years ago it would move 50% of its revenue offshore due to the U.S. regulatory environment, despite investing nearly $2 billion domestically in 2024▶ 1:41:27▶ 1:48:49.

Metadata

CommitteeHouse Financial Services Subcommittee on Oversight and Investigations
Chamber / CongressHouse · 119th Congress
DateFebruary 6, 2025
TypeHearing
Witnesses
Ms. Shayna Olesiuk — Director of Banking Policy, Better Markets
Mr. Fred Thiel — Chief Executive Officer, MARA
Mr. Austin Campbell — Adjunct Professor, Stern School of Business, New York University
Mr. Paul Grewal — Chief Legal Officer, Coinbase
Videoyoutube
Transcript217 caption blocks · 16,675 words · 2:04:23 runtime
EventCongress.gov 117858