Coinbase’s Chief Legal Officer issued a rallying cry to the industry, demanding answers after the survey results were published.
Crypto Hedge Funds Are Quietly Getting Debanked, Survey Shows
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Operation Chokepoint 2.0 Targets Crypto Hedge Funds
Three quarters of 160 crypto hedge funds polled, reported difficulty accessing banking services according to a recent survey – and Coinbase is not very happy about it.
The survey was conducted in October by the Alternative Investment Management Association (AIMA), a global not-for-profit organization representing the alternative investment industry.
The effort was part of a research report titled The Debanking Dilemma, and the results were announced in a press release published on AIMA’s website on Friday.
Twenty traditional hedge funds were also surveyed and none reported similar challenges, giving a strong indication that crypto hedge funds were being targeted solely due to their association with digital assets.
“Why would three quarters of 160 crypto hedge funds report issues with basic banking services over three years when zero were reported by twenty other alternative investors surveyed?” Paul Grewal, chief legal officer at Coinbase posted on X. “We need answers, now.”
Debanking crypto companies appears to be part of a coordinated attack by government regulators colloquially known as “Operation Chokepoint 2.0,” a phenomenon that is said to have its roots in the original “Operation Chokepoint” exercise, started some time around 2013.
According to a 2014 staff report by the U.S. House of Representatives Committee on Oversight and Government Reform, “Operation Choke Point was created by the Justice Department to ‘choke out’ companies the Administration considers a ‘high risk’ or otherwise objectionable, despite the fact that they are legal businesses.”
The report gives examples of these so-called “high-risk” businesses – short-term lenders, ammunition merchants, companies involved with porn or sex work, and several other niches.
Although the original phenomenon seems to have largely come to an end or had at least significantly abated by 2017, federal entities dusted off the regulatory tools from Choke Point and used them against the cryptocurrency industry after the Biden Administration came into power in 2020.
According to a 2023 paper by law firm Cooper and Kirk, “On November 18, 2021, the OCC [Office of the Comptroller of the Currency] fired the first shot in Operation Choke Point 2.0, issuing informal guidance documents that curtailed the authority of banks to engage in cryptocurrency activities.”
Three years later, the incoming pro- crypto Trump administration is probably the best hope against Choke Point 2.0. During his keynote speech at the Bitcoin Conference in July, Donald Trump promised as much.
“I will immediately shut down Operation Chokepoint 2.0,” Trump said. “They want to choke you out of business, we’re not going to let that happen.”
