U.S. financial regulators have made it “infeasible or impossible” for crypto-related companies to do business in the country through a series of “written and unwritten” policies and rules.

According to Intelligencer, crypto companies have repeatedly failed to obtain regulatory approval in the United States, leading to a "widespread belief" in the industry that the country's financial regulators are reluctant to let crypto flourish.

According to the report, U.S. financial regulators have made it “unfeasible or impossible” for crypto-related companies to do business in the country through a series of “written and unwritten” policies and rules.

Kristin Smith, CEO of the Blockchain Association, told reporters:

“It felt very coordinated, it felt like a carpet bombing.”

The government has repeatedly denied being against cryptocurrencies, but actions by regulators in recent months, particularly by the Office of the Comptroller of the Currency (OCC), have painted a different picture of the use of crypto-related companies.

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The OCC recently rejected Protego Trust’s application, although the company received conditional approval in 2021. The company hopes to provide cryptocurrency custody services to institutional clients and does not intend to engage with retail investors.

According to the report, Protego “reverse engineered” to ensure it would be attractive to DC’s decision-makers and have a smooth regulatory approval process. The company raised $80 million and received conditional approval quickly, helping it to achieve a $2 billion valuation.

However, the OCC rejected Protego’s application for a state trust charter over “technical issues” not previously mentioned in February, after completing the requirements for full approval, a person familiar with the matter told reporters.

Greg Gilman, founder of Protego, said:

“In the end, it felt like there was an unannounced and unexplained policy change that derailed our efforts.”

Although Protego was built to attract the regulatory environment, its experience is similar to that of most crypto-related companies trying to gain approval in the country.

Operation Chokepoint 2.0

The industry claims that regulators’ negative attitude toward cryptocurrencies points to a resurgence of Operation Chokepoint, an Obama-era policy aimed at stifling certain politically unpopular industries such as gambling, tobacco and pornography.

Under that policy, prudential financial regulators worked in concert to cut off these industries’ access to banking services, citing often arbitrarily defined reputational risks. This practice continued until Congress stepped in and created rules to ensure that it would not happen.

However, the Biden administration repealed the rule after taking office. This has led to concerns that regulators are once again trying to "debank" unpopular industries, with crypto being the latest target.

Some members of Congress recently wrote to prudential regulators highlighting these concerns and instructing them to make public all communications with cryptocurrency companies in order to investigate whether this unfair practice occurs again.

Meanwhile, Congress recently held hearings where industry experts and players testified about the myriad obstacles and setbacks in the regulatory process. However, lawmakers have yet to take any action on the matter.

This sentiment is echoed by observers in the political and legal circles, according to the Intelligencer report.

A former regulatory official who wished to remain anonymous told reporters:

“It’s different from the original choke point because they were very open about it and no one was guessing about their views, and the other difference is it’s actually much broader in scope.”