Following Donald Trump’s announcement that podcaster and venture capitalist David Sacks will become the “White House A.I. & Crypto Czar” in the Trump administration, Sacks criticised Operation Choke Point 2.0.
In a recent tweet, he said: “Too many stories of people getting hurt by Operation Choke Point 2.0. It needs to be looked into”. Sacks’ comment is indicative of the mounting protest inside the industry about certain institutional interventions.
What is Operation Choke Point 2.0?
President Trump has denounced its policy. Donald Trump completely disapproved of the policy and noted that after winning, he would stop and cancel it immediately.
Trump framed the argument for a fairer banking sector for companies offering cryptocurrency as an opportunity for economic freedom and innovation.
The term “Operation Choke Point” originates from an Obama-era initiative aimed at cutting off financial services to industries considered high-risk or controversial, such as gun shops and marijuana dispensaries.
Critics allege that the Biden administration has revived and expanded the strategy under the banner of Operation Choke Point 2.0, with a focus on targeting crypto companies and other disfavored tech startups.
Sacks’ tweet was in response to a thread by Chris Lane, the former CTO of Silvergate Bank, a major player in cryptocurrency banking. Lane recounted the challenges Silvergate faced due to regulatory actions.
He revealed that the bank’s SEN network, a critical infrastructure for the crypto economy, was effectively dismantled by regulators, leading to the collapse of the business.
“FTX didn’t kill us; our regulators did,” Lane wrote, detailing how regulatory restrictions on US dollar deposits for digital asset clients crippled Silvergate’s business model. Despite surviving a massive run on deposits following FTX’s collapse, the bank could not withstand the regulatory crackdown.
Wider Impacts on the Crypto Industry
Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz, echoed these concerns, describing Operation Choke Point 2.0 as an attack on political opponents and emerging tech industries.
He compared the current situation to the original Operation Choke Point, which targeted industries like gun shops and cannabis businesses. According to Andreessen, crypto startups now face systemic exclusion from banking services, payment processors, and even insurance.
Such measures, he argued, are designed to cripple these businesses and stifle innovation. Such steps are aimed at “crippling” these businesses and “stifling” innovation, he argued.
A Divisive Debate
The argument over Operation Choke Point 2.0 highlights the friction between regulators and the crypto industry. Supporters of such measures believe stricter oversight is essential to avoid an economic catastrophe, whereas others view such actions as overreaching and impeding innovation as well as economic freedom.
Trump’s pledge to abolish the policy will likely appeal to crypto supporters, who see the existing regulatory environment as a major roadblock to growth. With Trump in power now, the fate of Operation Choke Point 2.0 could turn out to be a test issue for the crypto industry.