On April 25, the Federal Reserve announced a major decision: to revoke the 2022 regulatory guidance on bank crypto asset and USD stablecoin activities, abolish the 2023 related "Supervisory Non-Objection" program, and withdraw from the prior policy statement on crypto asset business risk jointly issued with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).

Choke Point 2.0: The Suffocation of the Marginalized Crypto Industry

"Choke Point 2.0" is the crypto industry's term for a series of bank regulatory policies during the Biden administration. This term originates from the Obama era's "Choke Point," which referred to achieving regulatory goals by pressuring banks to cut off financial services to specific industries.

In the crypto market, Choke Point 2.0 generally refers to the period from 2022 to 2023 when the major U.S. financial regulatory agencies—the Federal Reserve, FDIC, and OCC—strongly discouraged banks from engaging in crypto asset-related activities through a series of guidance and policy statements, indirectly restricting the connection between crypto firms and the traditional banking system.

It all began in 2022 when the Federal Reserve issued a regulatory letter requiring state member banks to make pre-notification before engaging in crypto asset activities. While this seemed like a procedural requirement, it significantly raised the barrier for banks to enter the crypto space.

By early 2023, the regulatory intensity escalated further. The Federal Reserve, FDIC, and OCC jointly issued a statement explicitly stating that issuing or holding crypto assets on public, decentralized networks "is likely inconsistent with safe and sound banking practices." That same year, the regulators also required banks to obtain prior supervisory "non-objection" approval when engaging in USD stablecoin activities. This process was not only complex and time-consuming but also gave the regulators veto power.

As a result, many have referred to this wave of regulatory pressure as "Choke Point 2.0." Former Fidelity Investments' first crypto asset analyst Nic Carter described this series of actions in a deep-dive analysis as "a precise and widespread crackdown on the crypto industry through the banking system."

He pointed out that the regulators' goal was to increase the difficulty for banks to serve the crypto industry and sever the link between crypto firms and the fiat system. This not only restricted crypto companies' account opening and payment channels but also severely impacted the fiat on/off ramps for stablecoin issuers and exchanges. Some crypto firms even faced the risk of "losing banking services altogether," threatening stablecoin liquidity and exchange operations.

Related Reading:《In-Depth Analysis of "Debanking": The Triple Play of Compliance, Risk, and Politics》,《US Launches "Deplatforming Action"? Plans to Marginalize the Crypto Industry》

FTX Collapse: The Catalyst of Regulatory Pressure

The Deplatforming Action 2.0 and the November 2022 FTX Exchange collapse are closely intertwined. The FTX collapse resulted in customers losing billions of dollars, and market confidence plummeted. The 2022 crypto credit crisis did not have a significant impact on traditional finance, but regulatory agencies clearly wanted to be proactive and take preventive measures. Therefore, the regulatory system restricted the interaction between banks and the crypto industry to prevent risks from affecting the banking system.

Banks friendly to crypto naturally became the primary targets of regulation. Silvergate and Signature were among the few banks willing to serve crypto clients at the time, thus they faced immense pressure. In December 2022, Senators Elizabeth Warren, John Kennedy, and Roger Marshall co-authored a letter to Silvergate, criticizing it for failing to identify suspicious activities by FTX and its affiliated company, Alameda Research.

Subsequently, Silvergate experienced a bank run following the FTX collapse, with its stock price plunging from a high of $160 in March 2022 to $11.55 in January 2023. Signature announced a reduction of its crypto deposits from $23 billion to $10 billion and a complete exit from the stablecoin business. Another bank serving crypto clients, Metropolitan Commercial, also announced the closure of its crypto business in January 2023.

Shift in Bank Regulation Under the Trump Administration

By 2025, with Trump back in the White House, there was a significant change in the U.S. crypto regulatory environment. On March 7, the White House held its first cryptocurrency summit, and the U.S. Office of the Comptroller of the Currency (OCC) issued a series of interpretive letters, allowing national banks to offer cryptocurrency custody, stablecoin reserves, and blockchain node participation services without needing special approval. This reversed the restrictive guidance from the Biden administration, overturning Interpretive Letter 1179 from 2021.

OCC Acting Comptroller Hood said, "Digital assets should and must also be part of the U.S. economy." The new policy allows banks to securely store private keys for customers, hold stablecoin reserves pegged 1:1 to the U.S. dollar, and validate blockchain transactions as nodes, providing flexibility for banks to deeply engage in the digital asset space.

The OCC's shift may be closely tied to Trump's commitment. During this year's White House cryptocurrency summit, Trump stated, "Some people have been very badly hurt, they've been ridiculous... [but] that will all come to an end very soon." He criticized Operation Chokepoint 2.0, which "forced banks to close crypto business accounts, weaponizing government against the entire industry."

On April 17, Powell further clarified the direction of regulatory easing in his speech at the Economic Club of Chicago, stating that there is "room for relaxation" in the current cryptocurrency regulatory policies for banking institutions. He acknowledged the mainstreaming of cryptocurrency in recent years, pointing out that regulators were cautious due to "a series of rug pulls and fraud events," but the market has fundamentally changed, necessitating a clear regulatory framework for stablecoins and signaling support for innovation.

Related Reading: "Federal Reserve's Powell Discusses Cryptocurrency: What Positive Signals Has He Sent to the Industry?"

Today, the Federal Reserve officially revoked the relevant guidance on Operation Chokepoint 2.0, banks no longer need to report crypto-related activities, and such activities will be monitored through regular regulatory procedures. Consistent with the Trump administration's commitment to rescinding the policy of "exclusion of crypto companies from banking services," investigations by the House Oversight Committee and disclosures by the FDIC have also advanced policy transparency.

The Next Regulatory Boost for the Crypto Market?

Since 2025, positive news for the crypto market has been coming one after another. Following the SEC's approval of a slew of altcoin ETF applications, the return of traditional crypto market makers, the repeal of the DeFi broker rule, the dismissal of a series of crypto lawsuits, and the personal appointment of a pro-crypto SEC chairman by Trump, the market has now received good news from the banking regulatory front. The Fed announced the repeal of Operation Chokepoint 2.0, marking the end of a three-year era of intense regulation targeting interactions between banks and the crypto market.

The most direct impact of this positive development is a significant reduction in the barriers for banks to serve the crypto industry, a substantial decrease in legal risks, and the possibility of more banks offering accounts, payment, and custody services to crypto companies. Additionally, fiat channels for stablecoin issuers and exchanges are expected to become smoother as a result.

More importantly, the Trump administration has made crypto-friendly policies a top priority, and Powell's affirmation of a stablecoin regulatory framework has injected clear expectations into the market. These dense positive signals may further attract more traditional financial institutions into the market, boosting market liquidity and enhancing investor confidence.

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