Dr. Paul Kupiec, a former official at the Federal Deposit Insurance Corporation (FDIC), expressed his belief that assertions from cryptocurrency companies about federal government pressure leading to a pattern of "de-banking" are credible. Kupiec shared his statement with Federal Newswire on Jan. 28.
"I find crypto industry firms' claims to be credible, although I have no way to independently validate them,” said Kupiec. “The administration’s rational for the de-banking of crypto firms fits a tried-and-true formula invented during the Obama administration. FDIC chairman Gruenberg has a court-verified history of de-banking politically 'disfavored' legal businesses. The FDIC may have used the failure of SVB and Silvergate Bank to argue that the crypto business is inherently dangerous for bank’s solvency, but these bank failures had more to do with seriously deficient federal bank oversight than with crypto-linked fraud or crypto 'reputational risk' for the failed banks."
According to Yahoo Finance, more than 30 leaders in the U.S. crypto and tech sectors have claimed they have been targeted in what they describe as "Operation Chokepoint 2.0." This refers to restricted access to financial services allegedly due to government pressure. Marc Andreessen, co-founder of Andreessen Horowitz, discussed this issue on the Joe Rogan Experience podcast. He said that during the original Operation Chokepoint under the Obama administration, industries deemed "high-risk," such as payday lenders, were cut off from financial services. Andreessen added that under the Biden administration, tech startups, particularly in the crypto sector, have faced similar patterns of "de-banking."
U.S. Senator Cynthia Lummis reported that a whistleblower contacted her with allegations that the FDIC was destroying documents related to its activities in the digital asset space. In response, Lummis sent a letter on January 16 to Martin Gruenberg, who was then Chair of the FDIC, demanding that staff cease destroying materials to preserve them for "Congressional oversight in the coming months."
In 2023, Signature Bank and Silicon Valley Bank (SVB) experienced bank runs and were subsequently placed under FDIC receiverships, according to Bitcoin Magazine. Both banks had catered to clients linked with cryptocurrencies. The FDIC, Federal Reserve, and Treasury Department described these takeovers as "decisive actions to protect the U.S. economy by strengthening public confidence in our banking system." However, critics argued these actions represented a "reemergence" of Operation Chokepoint tactics aimed at crippling crypto businesses. Former Congressman Barney Frank, who is also a Signature Bank Board member, said regulators wanted to send a strong anti-crypto message. The Wall Street Journal editorial board echoed this sentiment by stating that "Signature’s seizure was motivated by regulators’ hostility toward crypto."
Crypto Briefing reported that the House Oversight Committee has launched an investigation into de-banking efforts targeting blockchain and crypto-affiliated firms and individuals. Under Rep. James Comer's leadership, letters were sent to industry associations and businesses requesting information about being unlawfully denied banking services. The letter included a statement from Coinbase CEO Brian Armstrong saying that 30 crypto founders have been de-banked.
Kupiec is currently a senior fellow at the American Enterprise Institute (AEI), where he studies financial regulation and markets according to their website. His previous roles include serving as director of the FDIC's Center for Financial Research and as a senior economist for the Board of Governors of the Federal Reserve System.
