New York finance regulator says Operation Choke Point 2.0 is ‘ludicrous’

Crypto firms in New York will soon have to contribute to their own regulation after the state’s financial services watchdog received new powers as part of a $220 billion budget agreement. 
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New York Department of Financial Services (NYDFS) superintendent Adrienne Harris has described the idea that last month’s Signature Bank takeover was motivated by crypto as “ludicrous,” reports Coindesk.

Harris reportedly made the remarks at the Chainalysis Links conference in New York.

Crypto Twitter has been awash with theories that the bank’s shutdown was related to a concerted crackdown on banks providing services to crypto firms. This line of thought was lent extra weight by Signature Bank board member Barney Frank, who claimed that the action was intended to send an ‘anti-crypto message.’

This theory, often referred to as Choke Point 2.0, is that regulators are specifically attempting to shut down the ability of cryptocurrency companies to access the banking system. It became popular after Silvergate announced that it was planning to liquidate, Silicon Valley Bank collapsed, and Signature Bank was shuttered.

Read more: US gov’t creates moral minefield after SVB and Signature bailout

Federal banking regulators have signaled in statements to banks that they need to be very careful about the nature of their engagement with the crypto ecosystem. A joint statement from the FDIC, the Board of Presidents of the Federal Reserve, and the OCC issued at the beginning of the year said that “the agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector.”

Harris insists that the shutdown was actually prompted by a bank run and a high proportion of uninsured deposits that presented a significant systemic risk.

Bloomberg reported last month that Signature had been facing a criminal investigation by the Department of Justice (DoJ) related to dealings with FTX and Alameda Research before they closed.

Bloomberg also recently reported that Tether relied on accounts at Signature that were held in the name of one of its banking partners, namely Capital Union Bank.

Regardless of whether or not Operation Choke Point 2.0 is ‘ludicrous,’ crypto firms are struggling to find consistent banking partners.

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