Caitlin Long, founder of crypto-friendly Custodia Bank, said regulators will be “playing whack-a-mole” if they continue to clamp down on Bitcoin (BTC).

Cryptocurrency Wars

A string of regulatory enforcement actions have recently raised suspicions of a coordinated attack on the U.S. crypto industry, most recently the SEC issued a Wells Notice to Coinbase on March 22.

Bitcoin bull Anthony Pompliano described “Operation Chokepoint 2.0” as a program to circumvent legal and democratic due process to enforce political views. He admitted that there has been no official confirmation of such a project, and he does not expect it to exist.

“It references an Obama-era scheme to use the banking system as a way to essentially impose political views or legislation without having to go through the legislative process.”

Operation Chokepoint (1.0) was not about fighting fraud and protecting consumers, said former Federal Deposit Insurance Corporation (FDIC) Chairman William Isaac, who served from 1981 to 1985. Rather, it was a proxy attack on an “undesirable” industry.

“By putting regulatory pressure on the banks that serve these industries, the entire industry is being treated as undesirable.”

Nic Carter, partner at Castle Island Ventures, was the first to connect the dots. He said that since the beginning of 2023, "a new choke point operation" has been in effect - adding that it is a deliberate attempt to stifle the crypto industry.

“This is a well-coordinated effort to marginalize the industry and cut its connection to the banking system — and it’s working.”

Custodia Rejected

On January 27, the custodian bank’s application to join the Federal Reserve was rejected. Later that day, the Kansas City Fed rejected Custodia’s application for a master account.

Master accounts can access the Federal Reserve's wholesale payments network without the need for a bank to act as an intermediary.

Long told Pompliano in an interview that before the rejection, Custodia was told to withdraw its application or they would be “denied.” Likewise, the fact that the two rejections came in quick succession is evidence of coordination, Long said.

Furthermore, she has since noted that the crypto industry has “covered up” law enforcement actions — a clear indication that Operation Chokepoint 2.0 is real.

“We’ve seen action against Paxos, action against stablecoin issuers, action between the IRS and the SEC against Kraken, and most of the crypto exchanges received Wells notices in early February.

Regulators Can’t Stop Bitcoin

In response to Bitcoin “solving this problem,” Long said that despite the damage already done, the recent BTC price surge shows that authorities do not have the power to shut it down.

She said regulators and those pushing the anti-crypto agenda refuse to accept that they will lose control of it. Instead of embracing change, they are trying to keep people stuck with “old technology.”

Long said fiat currencies and cryptocurrencies will coexist, but by forcing U.S. crypto companies to go overseas, regulators are setting themselves up for problems in the long run.

“Sadly, by pushing it all offshore, they’re going to be playing a game of whack-a-mole and frankly there’s going to be exposure, probably through correspondent banks, that they didn’t know existed.”

C3 Tip: The views, thoughts and opinions expressed here are the author's own and do not contain investment advice or recommendations. Every investment and transaction involves risk.