The Federal Reserve’s enforcement action against a crypto-friendly bank shows that Operation Choke Point policies may still be on the table. The enforcement action also undermines the idea that Harris would bring a change of pace for U.S. cryptocurrency policy should she win the presidential election.
The news broke on Sept. 4 when the Federal Reserve issued a cease and desist against United Texas Bank due to “significant deficiencies related to foreign correspondent banking and virtual currency customers, specifically risk management and compliance with … the Bank Secrecy Act.” To get back into compliance (and the Federal Reserve’s good graces), United Texas Bank was ordered to undertake a comprehensive plan spanning everything from ensuring the bank has adequate staffing to ensuring those staff members verify the identity, source of wealth, and business activities of all customers.
Dan Spuller, the Blockchain Association’s head of industry affairs, was quick to point out that the Federal Reserve’s enforcement actions appear to be only the latest of Choke Point 2.0 policies under the Biden administration. Referring to the original Operation Choke Point where the U.S. government pressured banks to refuse service to politically controversial (yet legal) businesses like gun shops and cannabis dispensaries, the term “Choke Point 2.0” has come to refer to more recent government efforts to choke off cryptocurrency-related businesses.
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To give just a few examples, consider what has happened under the Biden administration over the last few years. The White House discouraged banks from holding cryptocurrency, the Treasury proposed a 30% tax on the energy costs of cryptocurrency mining, the Federal Reserve denied a crypto-friendly bank’s request to be supervised, and the Energy Information Administration tried to use emergency authorities to force cryptocurrency miners to provide information. And all of this is to say nothing of the flurry of enforcement actions from the Securities and Exchange Commission.
So, it’s fair to say the Federal Reserve’s cease and desist appears to be only the latest of these efforts. Yet, in addition to echoing Operation Choke Point, the Federal Reserve’s actions also open questions about whether Harris would ever depart from the current administration’s policies.
Many democrats (both citizens and officials) have been rallying in hopes that a transition from Biden-Harris to Harris-Walz would bring about a more positive approach to cryptocurrency policy. For example, several congressional Democrats attended a virtual fundraiser on August 14 in hopes of raising awareness about their personal efforts to change cryptocurrency policy. Another fundraiser is scheduled for Sept. 13.
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Yet, setting aside the efforts of these individuals, Harris has given fans of cryptocurrency nothing to be hopeful about. She has yet to address the issue once on the campaign trail — leaving the public with little more than the past few years to judge.
Maybe the vice president could argue that she’s been busy building a campaign at the eleventh hour, but even the Democratic Party’s 2024 platform failed to mention cryptocurrency policy once across its 92 pages. In contrast, the 2024 Republican Party platform specifically states it will end the current crackdown on the cryptocurrency industry, defend the ability to mine Bitcoin, protect the ability to self-custody, strengthen financial privacy, and oppose the creation of a central bank digital currency.
Nothing would be better than having Democratic and Republican presidential candidates competing on improving financial freedom. So far, however, it has been a one-sided debate. Between the Federal Reserve’s latest action and Harris’ silence, it looks like a Harris-Walz administration would be unlikely to stray significantly from the Biden-Harris administration. Maybe I’m wrong and a concrete policy announcement is mere moments away, but all signs suggest the cryptocurrency industry shouldn’t hold its breath.
Nicholas Anthony is a guest columnist for Cointelegraph and a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. He is the author of “Digital Currency or Digital Control? Decoding CBDC and the Future of Money,” and “The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.”
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
