"Operation Choke Point 2.0: Biden's Debanking of Digital Assets" (majority staff report)
Document text
Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
TABLE OF CONTENTS
EXECUTIVE SUMMARY........................................................................................................... 1
KEY FINDINGS ........................................................................................................................... 2
DEFINING DEBANKING ........................................................................................................... 4
BIDEN ADMINISTRATION REGULATORS REINVENTED THE OBAMA
ADMINISTRATION REGULATORS’ OPERATION CHOKE POINT 1.0 PLAYBOOK. .. 6
THE BIDEN ADMINISTRATION ENGAGED IN A COORDINATED ATTACK
AGAINST THE DIGITAL ASSET ECOSYSTEM. ................................................................... 8
I. The Federal Reserve ......................................................................................................... 10
II. The FDIC .......................................................................................................................... 12
III. The OCC ........................................................................................................................... 14
IV. The SEC ............................................................................................................................ 15
OPERATION CHOKE POINT 2.0 STIFLED INNOVATION IN THE UNITED STATES.
....................................................................................................................................................... 21
COMMITTEE REPUBLICANS HAVE WORKED TO SHINE A LIGHT ON
OPERATION CHOKE POINT 2.0. .......................................................................................... 23
I. Hearing I ........................................................................................................................... 23
II. Hearing II .......................................................................................................................... 31
THE TRUMP ADMINISTRATION IS WORKING TO END OPERATION CHOKE
POINT 2.0. ................................................................................................................................... 35
I. The White House .............................................................................................................. 36
II. The Federal Reserve ......................................................................................................... 38
III. The FDIC .......................................................................................................................... 39
IV. The OCC ........................................................................................................................... 41
V. The SEC ............................................................................................................................ 42
ADDITIONAL EFFORTS ARE NEEDED TO ESTABLISH LONGSTANDING CLARITY
IN THE DIGITAL ASSET ECOSYSTEM. .............................................................................. 44
CONCLUSION ........................................................................................................................... 48
APPENDIX .................................................................................................................................. 49
EXECUTIVE SUMMARY
During the 118th Congress, the United States House Committee on Financial Services
(Committee) Republicans initiated an investigation into ongoing efforts by the Biden
Administration to deprive digital asset businesses and associated individuals of access to
financial services, a practice known as debanking.1 Committee Republicans continued their
investigation during the 119th Congress.2 In total, Committee Republicans have sent more than
20 letters, reviewed thousands of pages of documents, and held two hearings to uncover the
depths of the Biden Administration’s efforts. Through this work, Committee Republicans
identified a pattern of Biden Administration prudential regulators abusing their regulatory,
supervisory, and enforcement authorities to push entities involved in the digital asset ecosystem
out of the U.S. financial system.
The Biden Administration sought to make it nearly impossible to engage in digital asset-
related activities. To do so, it utilized a regulatory regime that provided too little certainty to
financial institutions and gave too much discretion to the regulators that oversee them.
Regulators used this discretion to exert substantial pressure on financial institutions—often
through informal guidance, such as interagency statements or interpretive letters—to discourage
these entities from engaging in digital asset-related activities. In addition to informal guidance,
regulators weaponized enforcement actions to achieve an anti-digital asset agenda.
Lack of regulatory clarity, uncertain access to financial services, and rampant, ex-
statutory enforcement activity against the digital asset ecosystem created a broad chilling effect
across the banking industry that resulted in the debanking of at least 30 entities and individuals
engaging in digital asset-related activities.3 As a result, the Biden Administration stifled
blockchain innovation, strained financial institutions, and denied Americans and American
businesses access to the U.S. banking system.4 Digital asset founders and entrepreneurs were
forced to divert focus from operations and the development of new products and services.5
The practice of regulators tamping down on industries disfavored by an administration is
sadly not a new occurrence. During the Obama Administration, regulators sought to deprive
certain businesses, such as those engaged in firearm and ammunition sales, of access to financial
institutions in a program called “Operation Choke Point” (Operation Choke Point 1.0).6 While
President Trump ended this initiative during his first term, the Biden Administration reinvented
1
Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem: Hearing Before the
Subcomm. on Digital Assets, Financial Technology, and Inclusion of the H. Comm. of Financial Serv., 118th Cong.
(2023) [hereinafter “Mar. 9, 2023 Hearing”].
2
Operation Choke Point 2.0: The Biden Administration's Efforts to Put Crypto in the Crosshairs: Hearing before
the Subcomm. on Oversight & Investigations of the H. Comm. on Financial Serv., 119th Cong. (2025) [hereinafter
“Oversight Hearing”].
3
See generally PowerfulJRE, Joe Rogan Experience #2234 – Marc Andreessen, YOUTUBE, Nov. 26, 2024,
https://www.youtube.com/watch?v=ye8MOfxD5nU [hereinafter “Debanking Podcast”].
4
See Oversight Hearing, supra note 2.
5
See id.
6
Frank Keating, Operation Choke Point reveals true injustices of Obama’s Justice Department, THE HILL, Nov. 7,
2018, https://thehill.com/blogs/congress-blog/politics/415478-operation-choke-point-reveals-true-injustices-of-
obamas-justice/ [hereinafter “Keating: Operation Choke Point reveals true injustices”].
Page 1 of 51
the Obama Administration’s playbook to target digital asset businesses—an effort now
colloquially called “Operation Choke Point 2.0.”7 Since his inauguration in 2025, President
Trump has worked to reverse the Biden Administration’s debanking practices and to revive
digital asset innovation in the United States. Committee Republicans commend the Trump
Administration’s swift actions to end the Biden Administration’s unfair initiatives8 and continue
to pursue legislative solutions to create a clear, functional framework for digital assets.
While digital assets were the target of Operation Choke Point 2.0, “any legal American
industry could be next if regulators continue to use banking services as a political weapon.”9 Any
business engaging in legitimate, legal business activity should not experience account closure
driven by the political preferences of an individual administration or regulator. It is imperative
that the patterns of prior administrations are identified and their playbooks understood to help
ensure that future administrations cannot choke off businesses and industries simply because the
administrations disagree with or do not fully understand them. Committee Republicans aim to
prevent an “Operation Choke Point 3.0” and ensure that lawful American businesses are not
targeted and denied access to financial services by federal regulators in the future.
KEY FINDINGS
➢ The Biden Administration failed to establish a clear, functional digital asset regulatory
regime, which allowed certain federal financial regulators to stifle digital asset projects and
curtail activity by firms. The financial regulators exerted informal pressure and issued
guidance documents to discourage financial institutions from providing services to digital
asset firms.
➢ The Biden Administration justified its actions by characterizing the digital asset ecosystem as
an industry prone to market volatility and risk.10 Regulators often highlighted the risks posed
by digital assets, specifically violations of anti-money laundering (AML) and countering the
financing of terrorism (CFT) standards.11 However, the Biden Administration frequently
7
Oversight Hearing, supra note 2.
8
See, e.g., Press Release, The White House, Fact Sheet: President Donald J. Trump Guarantees Fair Banking for All
Americans (Aug. 7, 2025), https://www.whitehouse.gov/fact-sheets/2025/08/fact-sheet-president-donald-j-trump-
guarantees-fair-banking-for-all-americans/.
9
Oversight Hearing, supra note 2, at 11 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
10
See FED. DEPOSIT INSURANCE CORP., RISK REVIEW (2023), at 1.
11
Wally Adeyemo, Deputy Secretary, U.S Dep’t of the Treasury, Testimony before the S. Comm. on Banking,
Housing, and Urban Affairs (Aug. 9, 2024) (as prepared for delivery), (“The DPRK, which through numerous
complex state-sponsored cyber heists, is able to acquire, launder, and store illicit revenue. It relies on anonymity-
enhancing technologies like mixers to hide the sources of its funds. And it leverages over-the-counter digital assets
traders to acquire fiat currency. In addition, we’ve seen Russia increasingly turning to alternative payment
mechanisms—including the stablecoin tether—to try to circumvent our sanctions and continue to finance its war
machine.”); see also U.S. DEP’T OF THE TREASURY, ACTION PLAN TO ADDRESS ILLICIT FINANCING RISKS OF DIGITAL
ASSETS, at 4 (2022), https://home.treasury.gov/system/files/136/Digital-Asset-Action-Plan.pdf [hereinafter
“Treasury Action Plan”] (“Virtual assets can also be sent directly to ISIS supporters located in northern Syria, often
to Idlib, or indirectly via Turkey, where ISIS is able to access them through virtual asset trading platforms.
Additionally, some al Qaeda facilitators are exploring raising and moving funds in virtual assets. In particular, al
Qaeda and affiliated groups have used social media platforms to solicit virtual asset donations as well as virtual asset
vouchers to transfer money to members in Syria.”).
Page 2 of 51
undermined its argument by stating that the “use of virtual assets for money laundering
remains far below the scale of fiat currency and more traditional assets by volume and value
of transactions.”12 In other words, the Biden Administration itself recognized that the use of
digital assets to launder proceeds is less common than traditional money, and the use of
digital assets to finance terrorism is “limited in scale.”13
➢ Biden Administration regulators took various actions to dissuade financial institutions from
providing services to digital asset firms. Of particular concern, many of these actions were
taken at a time when Congress was working to create clear regulatory guidance for digital
assets.
❖ The Board of Governors of the Federal Reserve System (Federal Reserve or the Fed).
The Fed Vice Chair for Supervision discouraged banks from engaging in digital asset-
related activities through policy statements, supervision and regulation letters,14 and the
creation of a Novel Activities Supervision Program.15 The Novel Activities Supervision
Program increased the supervision of “novel activities,” including digital asset-related
activities, conducted by supervised banking organizations.16
❖ The Federal Deposit Insurance Corporation (FDIC or Corporation). The FDIC sent
“pause” letters to financial institutions effectively encouraging them to stop efforts to
engage in digital asset-related activities.17 This delay tactic—and the FDIC’s voluminous
document requests—made it impracticable for financial institutions to pursue digital
asset-related activities.
❖ The Office of the Comptroller of the Currency (OCC). The OCC has historically
required regulated institutions to demonstrate they have adequate controls in place when
engaging in a variety of activities. However, under the Biden Administration, the OCC
layered on additional red tape for digital asset-related activities, for example by requiring
each supervised institution to receive a non-objection letter before engaging in digital
asset activities.18
12
Treasury Action Plan, supra note 11; see also Financial Crimes in Digital Assets and Cryptocurrencies, KPMG,
https://kpmg.com/us/en/articles/2023/financial-crimes-in-digital-assets.html (last visited Nov. 25, 2025).
13
Treasury Action Plan, supra note 11.
14
BD. OF GOVS. OF THE FED. RESERVE SYSTEM, SR 22-6 (2022),
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20250424a3.pdf [hereinafter “SR 22-6”].
15
BD. OF GOVS. OF THE FED. RESERVE SYSTEM, SR 23-8 (2023),
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20250424a4.pdf [hereinafter “SR 23-8”].
16
Novel Activities Supervision Program, BD. OF GOVS. OF THE FED. RESERVE SYSTEM,
https://www.federalreserve.gov/supervisionreg/novel-activities-supervision-program.htm (last visited Nov. 25,
2025).
17
Press Release, Fed. Deposit Insurance Corp., FDIC Releases Documents Related to Supervision of Crypto-
Related Activities (Feb. 5, 2025), https://www.fdic.gov/news/press-releases/2025/fdic-releases-documents-related-
supervision-crypto-related-activities/ [hereinafter “FDIC Pause Letters Press Release”]; FED. DEPOSIT INSURANCE
CORP., FDIC RECORDS—CORRESPONDENCE RELATED TO CRYPTO-RELATED ACTIVITIES (2025) [hereinafter “FDIC
Pause Letters”].
18
OFF. OF THE COMPTROLLER OF THE CURRENCY, INTERPRETIVE LETTER 1179 (2021),
https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2021/int1179.pdf [hereinafter “IL
1179”].
Page 3 of 51
❖ The Securities and Exchange Commission (SEC). The SEC refused to establish a clear,
functional regulatory regime governing digital assets and used regulation by enforcement
tactics to target digital asset firms. On several occasions, the SEC exceeded its statutory
authority to curtail digital asset activity, which was contrary to the SEC’s mission to
protect investors and promote capital formation.19
➢ The Trump Administration is charting a new path for digital assets by pursuing
straightforward, commonsense regulation and ending debanking. Importantly, Trump
Administration financial regulators have rescinded numerous Biden-era guidance,
supervision and regulation letters, interpretive letters, and rules that fostered the debanking of
the digital asset ecosystem by certain regulators.
➢ Congress is doing its duty to ensure that federal agencies encourage innovation and ensure
lawful businesses can thrive in America by enacting payment stablecoin legislation, working
toward comprehensive digital asset market structure reforms, and endeavoring to remove
reputational risk from prudential regulators’ supervisory materials.
DEFINING DEBANKING
Debanking occurs when a bank closes an individual or corporate account because the
account holder, or their actions, are subjectively determined to pose a financial, legal, or
reputational risk to the financial institution.20 The term “debanking” stems from derisking, which
involves “terminating or restricting business relationships with clients or categories of clients to
avoid, rather than manage, risk.”21 According to the Bank Policy Institute, “[w]hile the banking
agencies have said ‘no customer type presents a single level of uniform risk,’ there is no safe
harbor preventing de-risking.”22
Importantly, there are instances where a bank may close an individual’s or entity’s
account for legitimate reasons, including instances of suspicious activity.23 The filing of a
Suspicious Activity Report (SAR) is one of the primary reasons for account closure.24 The other
19
Mission, SECURITIES & EXCHANGE COMM’N, https://www.sec.gov/about/mission (last visited Nov. 25, 2025)
[hereinafter “SEC Mission”].
20
See Debanking, CAMBRIDGE DICTIONARY, (4th ed. 2013),
https://dictionary.cambridge.org/us/dictionary/english/debanking; see also Jack Solowey and David Inserra, It’s Time
to End Debanking, CATO INSTITUTE, Jan. 7, 2025, https://www.cato.org/commentary/its-time-end-debanking.
21
Derisking, U.S. DEP’T OF STATE, https://www.state.gov/de-risking/ (last visited Nov. 25, 2025).
22
BANK POLICY INSTITUTE, THE TRUTH ABOUT ACCOUNT CLOSURES 1-2 (2024) [hereinafter “The Truth About
Account Closures”].
23
Heather Trew, Closing the book on account closures, ABA BANKING JOURNAL, Jan. 22, 2024,
https://bankingjournal.aba.com/2024/01/closing-the-book-on-account-closures/.
24
See The Truth About Account Closures, supra note 22, at 1. There is ongoing debate about the effectiveness of
current SAR reporting requirements. According to one study, “[i]n all major financial markets, the number of reports
of suspicions of money laundering continues to grow. . . .” Some argue that this increase is because “U.S. financial
institutions are feeling increasing pressure to engage in the practice of ‘defensive filing’—that is, the filing of SARs
even when the suspicious nature of the conduct is potentially very arguable—simply in order to avoid after-the-fact
questions by the institution’s regulator regarding why a SAR was not filed . . . .” See Peter D. Hardy, Suspicious
Page 4 of 51
is a high-risk designation.25 Debanking can occur “as a result of an anti-money laundering and
‘reputational risk’ regime administered by the federal banking agencies where certain types of
customers are designated as ‘high[-]risk.’”26 The over designation of accounts as high-risk can
result in “an overly broad and punitive approach,” which “can significantly raise the costs to the
[financial institution] and increase the risk of regulatory penalties, leading to reduced services
even for law-abiding customers.”27 For example, a high-risk designation creates a significant
compliance burden that requires entities to “continually document that the account is not an
illegal one,” at the risk of a “draconian enforcement action.”28
Federal law does not require banks to explain why they close an account.29 As a result,
financial institutions often do not provide any explanation—or much notice—to customers
whose accounts are closed due to being labeled high-risk.30 In cases where a SAR is filed, banks
are statutorily prohibited by the Bank Secrecy Act from disclosing the reason for account closure
because it could indirectly notify the subject of a SAR that a SAR has been filed.31
Vague laws and legal terms have long allowed federal regulators to choke certain
businesses off from the U.S. banking system. Indeed, regulators “have so much discretion that
they have the authority to warn banks about dealing with certain types of customers for almost
any reason they choose to justify.”32 While federal regulators have relied on the vagueness of
“reputational risk,” they have similarly relied on alternative methods to encourage financial
institutions to withhold services. For example, the FDIC can terminate a bank’s deposit insurance
if it determines the bank is engaging in “unsafe or unsound practices.”33 Similarly, the 2010
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) authorized the Fed
to create special regulations “to prevent or mitigate risks to the financial stability of the United
States that could arise from the material financial distress or failure, or ongoing activities, of
large, interconnected financial institutions.”34 Yet, Dodd-Frank failed to define financial stability
or distress—leaving that discretion to regulators.35
The wrongful debanking of legitimate businesses engaging in lawful activity has long
term consequences for the U.S. banking system. For example, debanking negatively affects a
Activity Reports Rarely Provide “Operational Value” to Law Enforcement Investigations, MONEY LAUNDERING
WATCH BALLARD SPAHR L.L.P., Oct. 19, 2017, https://www.moneylaunderingnews.com/2017/10/suspicious-activity-
reports-rarely-provide-operational-value-to-law-enforcement-investigations/.
25
The Truth About Account Closures, supra note 22, at 1.
26
Austin Anton, BPI Statement on President Trump’s Remarks on ‘Debanking’, BANK POLICY INSTITUTE, Jan. 23,
2025, https://bpi.com/bpi-statement-on-president-trumps-remarks-on-debanking/.
27
See The Truth About Account Closures, supra note 22, at 1.
28
Id. at 1-2.
29
The bank closed my checking account and did not notify me. Is this legal?, OFF. OF THE COMPTROLLER OF THE
CURRENCY, Nov. 6, 2025, https://www.bankcustomerassistance.gov/help-topics/bank-accounts/opening-closing-
inactive-bank-accounts/closing-a-bank-account/closing-closed-account.html.
30
Id.; see also Ron Lieber and Tara Siegel Bernard, Why Banks Are Suddenly Closing Down Customer Accounts,
N.Y. TIMES, Nov. 5, 2023, https://www.nytimes.com/2023/11/05/business/banks-accounts-close-suddenly.html.
31
31 U.S.C. § 5318(g)(2).
32
Norbert Michel, Only Cutting Back Regulatory Discretion Will Stop Debanking, CATO INSTITUTE, Dec. 4, 2024,
https://www.cato.org/commentary/only-cutting-back-regulatory-discretion-will-stop-debanking.
33
Id.
34
Id.
35
Id.
Page 5 of 51
company’s capacity to pay basic operating expenses, including wages, payroll taxes, employee
benefits, rent, utilities, office supplies, travel costs, and more.36 As Nathan McCauley, the CEO
and co-founder of Anchorage Digital, an institutional digital asset platform, testified before the
Senate Committee on Banking, Housing, and Urban Affairs:
For over two years, [Anchorage Digital] had been doing business
with [their] bank. [They] were a valuable client to them: [they] held
a corporate bank account there, and they held [their] client fees from
custody and other services, along with general corporate funds used
for day-to-day business expenses such as payroll and administrative
expenses.37
That was until June 2023, when Anchorage Digital was notified by the bank that their account
“would be closed in thirty days because they were not comfortable with [Anchorage Digital’s]
crypto clients’ transactions.”38
The debanking of legitimate businesses also risks stifling innovation and pushing
innovation overseas. Regulatory uncertainty sows doubt among entrepreneurs. This was evident
after the 2023 bank failures when several founders debated moving outside of the United States,
opening offices abroad.39
BIDEN ADMINISTRATION REGULATORS REINVENTED THE OBAMA
ADMINISTRATION REGULATORS’ OPERATION CHOKE POINT 1.0 PLAYBOOK.
Disturbingly, the Biden Administration was not the first Democratic administration to
wrongfully target an industry it disfavored. In early 2013, President Barack Obama’s Financial
Fraud Enforcement Task Force, which included the FDIC, the Consumer Financial Protection
Bureau (CFPB), the SEC, the OCC, and several other agencies, launched Operation Choke Point
1.0 as a policy initiative.40 During Operation Choke Point 1.0, federal regulators “pressured
banks to close accounts of businesses solely because they were ideologically opposed to their
existence,” including coin, firearms, and ammunition dealers, as well as short-term lenders.41
36
See generally Oversight Hearing, supra note 2, at 9, 30 (testimony of Mr. Austin Campbell, Adjunct Professor,
Stern School of Business).
37
Investigating the Real Impacts of Debanking in America: Hearing Before the Senate Banking Committee, 119th
Cong. (2025) [hereinafter “Senate Banking Hearing”] (testimony of Nathan McCauley, CEO & Co-Founder,
Anchorage Digital).
38
Id.
39
Jeff Wilser, US Crypto Firms Eye Overseas Move Amid Regulatory Uncertainty, COINDESK, Mar. 30, 2023,
https://www.coindesk.com/consensus-magazine/2023/03/27/crypto-leaving-us. While Biden Administration
regulators and certain lawmakers highlighted the causal relationships between the banking failures and digital asset-
related activity, this theory has been debunked. In a House Committee on Financial Services, Subcommittee on
Digital Assets, Financial Technology and Inclusion hearing, former New York State Department of Financial
Services Superintendent Adrienne Harris explained that attributing Signature Bank’s failure to crypto was a
“misnomer” and that digital asset withdrawals during the bank run were proportional to the bank’s total digital asset
deposits. See Continued Oversight Over Regional Bank Failures: Hearing before the Subcomm. on Financial
Institutions and Monetary Policy and the Subcomm. on Oversight & Investigations, 118th Cong. (2023).
40
Keating: Operation Choke Point reveals true injustices, supra note 6.
41
Id.
Page 6 of 51
Although the original intent of Operation Choke Point 1.0 was purportedly to fight
fraud,42 the program ballooned into overregulation and threats of enforcement actions. Former
Oklahoma Governor and former Chief Executive Officer of the American Bankers Association
Frank Keating described Operation Choke Point 1.0 as “the Justice Department telling bankers to
behave like policemen and judges” by “asking banks to identify customers who may be breaking
the law or simply doing something government officials don’t like.”43 Officials from the FDIC
and the OCC “threaten[ed] banks with regulatory pressure if they did not bend to their will.”44 As
Governor Keating explained, “[i]f a bank doesn’t shut down a questionable account when
directed to do so, Justice slaps the institution with a penalty for wrongdoing that may or may not
have happened. The government is compelling banks to deny service to unpopular but perfectly
legal industries by threatening penalties.”45 Accordingly, many legal businesses saw their
accounts terminated without explanation.46
To achieve their goals during Operation Choke Point 1.0, federal regulators labeled the
disfavored industries as high-risk.47 Such a designation discouraged banks from providing
services to these so-called high-risk industries. Public reporting revealed that FDIC regulators
“simply had to inform the banks they were overseeing that the government considered certain
types of their customers ‘high[-]risk,’” because “[t]he mere implication of a threat was enough to
pressure banks into closing accounts, because no U.S. bank wants anything to do with extra
audits or investigations from their regulator, much less additional operating restrictions or civil
and criminal charges.”48 In part, financial institutions’ reactivity justifiably stemmed from
regulators’ “enormous discretion.”49
The Trump Administration ended Operation Choke Point 1.0.50 On August 16, 2017, the
Department of Justice (DOJ) sent a letter to the House Committee on the Judiciary, confirming
they had ended Operation Choke Point 1.0.51 Former Assistant Attorney General, Stephen Boyd,
stated that DOJ would no longer “discourage the provision of financial services to lawful
industries.”52 On May 22, 2019, the FDIC announced that it settled a lawsuit filed against the
42
Frank Keating, Justice Puts Banks in a Choke Hold, WALL STREET J., Apr. 24, 2014,
https://www.wsj.com/articles/SB10001424052702304810904579511911684102106?msockid=2b25242999fa650235
ab31e8985d64c0 (emphasis added) [hereinafter “Keating: Justice Puts Banks in a Choke Hold”].
43
Id. (emphasis added).
44
Keating: Operation Choke Point reveals true injustices, supra note 6.
45
Keating: Justice Puts Banks in a Choke Hold, supra note 42 (emphasis added).
46
Keating: Operation Choke Point reveals true injustices, supra note 6.
47
Press Release, H. Comm. on Oversight & Government Reform, Report: DOJ’s Operation Choke Point Secretly
Pressured Banks to Cut Ties with Legal Business (May 29, 2014), https://oversight.house.gov/report/report-dojs-
operation-choke-point-secretly-pressured-banks-cut-ties-legal-business/.
48
Norbert Michel, Newly Unsealed Documents Show Top FDIC Officials Running Operation Choke Point, FORBES,
Nov. 5, 2018, https://www.forbes.com/sites/norbertmichel/2018/11/05/newly-unsealed-documents-show-top-fdic-
officials-running-operation-choke-point/.
49
Id.
50
Victoria Guida, Justice Department to end Obama-era ‘Operation Choke Point,’ POLITICO, Aug. 17, 2017,
https://www.politico.com/story/2017/08/17/trump-reverses-obama-operation-chokepoint-241767.
51
Justice Department Formally Ends “Operation Choke Point,” ABA BANKING JOURNAL, Aug. 17, 2017,
https://bankingjournal.aba.com/2017/08/justice-department-formally-ends-operation-choke-point/.
52
Id. (Assistant Attorney General Stephen Boyd served as the Assistant Attorney General from September 5, 2017,
until January 20, 2021).
Page 7 of 51
Corporation and the OCC in 2014 by a trade group and payday lenders relating to Operation
Choke Point 1.0 and told Congress they would cease issuing informal, unwritten suggestions on
what industries should not be banked, regardless of the company’s legal operating status.53
THE BIDEN ADMINISTRATION ENGAGED IN A COORDINATED ATTACK
AGAINST THE DIGITAL ASSET ECOSYSTEM.
Committee Republicans’ investigation revealed that several agencies within the
Committee’s jurisdiction—including the Federal Reserve, the FDIC, the OCC, and the SEC—
participated in a largescale, coordinated effort to undermine the growth of the digital asset
ecosystem by preventing the traditional financial system from serving the ecosystem or engaging
in digital asset-related activity. Moreover, Biden Administration regulators not only refused to
provide digital asset firms with clear, workable rules, but they also sought to take actions while
Congress was working to provide regulatory certainty through legislation.
On March 9, 2022, President Biden signed an executive order (E.O.) entitled “Ensuring
Responsible Development of Digital Assets.”54 This E.O. concluded that digital asset firms
engaging in traditional financial services should be regulated by the same rules as traditional
financial institutions.55 However, it also stated that the “new and unique uses and functions that
digital assets can facilitate may create additional economic and financial risks requiring an
evolution to a regulatory approach that adequately addresses those risks.”56 Months later, on
September 16, 2022, the Biden Administration released the “First-Ever Comprehensive
Framework for Responsible Development of Digital Assets,” in which it encouraged regulators
“to aggressively pursue investigations and enforcement actions against unlawful practices in the
digital assets space . . . [and] redouble their efforts to monitor consumer complaints and to
enforce against unfair, deceptive, or abusive practices.”57
The Administration targeted digital asset firms on the premise that their innovative
technologies and the sector’s limited regulatory framework posed heightened risks. For example,
the E.O. identified financial stability and illicit finance as significant risks associated with digital
assets.58 Despite claiming significant risks associated with digital assets and calling for
regulatory gaps to be filled,59 the Biden Administration refused to right-size the regulatory
53
Alan S. Kaplinsky, FDIC settles Operation Choke Point lawsuit; entire lawsuit dismissed, CONSUMER FINANCE
MONITOR BY BALLARD SPAHR L.L.P., May 23, 2019, https://www.consumerfinancemonitor.com/2019/05/23/fdic-
settles-operation-choke-point-lawsuit/.
54
Exec. Order No. 14067, 87 Fed. Reg. 14143 (2022) [hereinafter E.O. 14067].
55
Id.
56
Id.
57
Press Release, The White House, Fact Sheet: White House Releases First-Ever Comprehensive Framework for
Responsible Development of Digital Assets (Sept. 16, 2022), https://bidenwhitehouse.archives.gov/briefing-
room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-
responsible-development-of-digital-assets.
58
E.O. 14067, supra note 54.
59
Brian Deese et al., The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks, THE WHITE HOUSE, Jan.
27, 2023, https://bidenwhitehouse.archives.gov/nec/briefing-room/2023/01/27/the-administrations-roadmap-to-
mitigate-cryptocurrencies-risks/ (“But the events of the past year underscore that more is needed. . . . In the coming
months, the Administration will also unveil priorities for digital assets research and development, which will help
Page 8 of 51
structure for digital assets to enable firms to operate under clear rules. Instead, the repeated
emphasis on risk resulted in heightened scrutiny by federal regulators when examining financial
institutions engaging in digital asset-related activities. Paul Grewal, the Chief Legal Officer of
Coinbase, the largest U.S. based digital asset trading platform,60 testified to the Committee in a
February 2025 hearing, entitled Operation Choke Point 2.0: The Biden Administration’s Efforts
to Put Crypto in the Crosshairs, that it was the Biden Administration’s “combination of refusing
to lay out simple rules that we can all follow and, when they have questions with compliance
with those rules, operating under the cloak of secrecy and tactics such as delay and obfuscation
to essentially exhaust the firm into submission.”61
Federal regulators followed the White House’s lead, collectively making it clear that they
intended to exercise increased scrutiny over the digital asset ecosystem. For example, in January
2023, the Fed, the FDIC, and the OCC released a joint statement, entitled “Joint Statement on
Crypto-Asset Risks to Banking Organizations” (2023 Crypto-Asset Risks Joint Statement),
highlighting the “key risks associated with crypto-assets and crypto-asset sector participants that
banking organizations should be aware of[.]”62 In the joint statement, the agencies stated they
would be taking a careful and cautious approach related to current or proposed digital asset-
related activities and exposures at each banking organization. Most importantly, they expressed
concern with the “heightened risks associated with open, public, and/or decentralized networks,
or similar systems” and “the [s]usceptibility of stablecoins to run risk, creating potential deposit
outflows for banking organizations that hold stablecoin reserves.”63 While the 2023 Crypto-Asset
Risks Joint Statement did state that “[b]anking organizations are neither prohibited nor
discouraged from providing banking services to customers of any specific class or type, as
permitted by law or regulation,” the regulators admitted they were assessing whether current and
proposed crypto-asset-related activities by banking organizations can be conducted in a manner
that adequately addresses safety and soundness, consumer protection, legal permissibility, and
compliance with applicable laws and regulations, including anti-money laundering and illicit
finance statutes and rules.”64 Such ambiguity left financial institutions in limbo and without any
the technologies powering cryptocurrencies protect consumers by default. Congress, too, needs to step up its
efforts.”); FINANCIAL STABILITY OVERSIGHT COUNCIL, REPORT ON DIGITAL ASSET FINANCIAL STABILITY RISKS AND
REGULATION, Executive Summary (2022) (“Crypto-asset activities could pose risks to the stability of the U.S.
financial system if their interconnections with the traditional financial system or their overall scale were to grow
without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory
structure.”); Janet Yellen, Secretary, Dep’t of the Treasury, Remarks from Secretary of the Treasury Janet L. Yellen
on Digital Assets (Apr. 7, 2022) (“As banks and other traditional financial firms become more involved in digital
asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities. And, new
types of intermediaries, such as digital asset exchanges and other digital native intermediaries, should be subject to
appropriate forms of oversight.”).
60
Top Cryptocurrency Spot Exchanges, COIN MARKET CAP,
https://coinmarketcap.com/rankings/exchanges/ (last visited Nov. 25, 2025).
61
Oversight Hearing, supra note 2, at 53 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
62
BD. OF GOVS. OF THE FED. RESERVE SYSTEM, FED. DEPOSIT INSURANCE CORP., OFF. OF THE COMPTROLLER OF THE
CURRENCY, JOINT STATEMENT ON CRYPTO-ASSET RISKS TO BANKING ORGANIZATIONS 1 (2023),
https://www.fdic.gov/news/press-releases/2023/pr23002a.pdf [hereinafter “2023 Crypto-Asset Risks Joint
Statement”].
63
Id.
64
Id.
Page 9 of 51
meaningful guidance; given that institutions have become increasingly risk-averse,65 many opted
to stay away from digital assets entirely.
Federal regulators largely used non-rulemaking tools to exclude—or remove—the digital
asset ecosystem from participating in the banking system. Examples of such agency actions are
described in the sections below.
I. The Federal Reserve
The Federal Reserve’s five critical functions include “conduct[ing] the nation’s monetary
policy, promot[ing] financial system stability, supervis[ing] and regulat[ing] financial
institutions, foster[ing] payment and settlement system safety and efficiency, and promot[ing]
consumer protection and community development.”66 Therefore, the Federal Reserve’s mandate
to promote and ensure financial system stability extends to digital asset-related activity
conducted by financial institutions.67 As part of its supervisory and regulatory authority, the Fed
releases supervision and regulation letters (SR), which “address significant policy and procedural
matters related to the Federal Reserve System’s supervisory responsibilities.”68
On August 16, 2022, the Federal Reserve released SR 22-6, which highlighted the risks
posed by digital asset-related activities to “safety and soundness, consumer protection, and
financial stability[.]”69 SR 22-6 required that “[p]rior to engaging in new activities of any kind, a
supervised banking organization must ensure that such activities are legally permissible.”70 This
required analyzing the permissibility of activities under state and federal law to determine
whether additional filings were necessary.71 Additionally, Federal Reserve-supervised
organizations that sought to engage in digital asset-related activities were instructed to “notify its
lead supervisory point of contact at the Federal Reserve.”72
On January 27, 2023, the Federal Reserve announced through a policy statement73 that it
would exercise its discretion under Section 9(13) of the Federal Reserve Act74 to limit state
member banks to engaging as principal in only those activities that were permissible for national
banks, overseen by the OCC, subject to the terms, conditions, and limitations placed on national
banks with respect to the activity unless those activities are permissible for state banks by federal
65
See generally BD. OF GOVS. OF THE FED. RESERVE SYSTEM, SENIOR LOAN OFFICER OPINION SURVEY ON BANK
LENDING PRACTICES (2025) (describing how banks are actively tightening underwriting standards, which highlights
their reduced tolerance for risk).
66
The Federal Reserve Explained, BD. OF GOVS. OF THE FED. RESERVE SYSTEM.,
https://www.federalreserve.gov/aboutthefed/fedexplained/who-we-are.htm (last visited Nov. 25, 2025).
67
FED. RESERVE BANK OF NEW YORK, ECONOMIC POLICY REVIEW: THE FINANCIAL STABILITY IMPLICATIONS OF
DIGITAL ASSETS (2024).
68
Supervision and Regulation Letters, BD. OF GOVS. OF THE FED. RESERVE SYSTEM,
https://www.federalreserve.gov/supervisionreg/srletters/srletters.htm (last visited Nov. 25, 2025).
69
SR 22-6, supra note 14.
70
Id.
71
Id.
72
Id.
73
Policy Statement on Section 9(13) of the Federal Reserve Act, 88 Fed. Reg. 7848 (Feb. 7, 2023); 12 CFR 208.112
[hereinafter “Fed Policy Statement”].
74
12 U.S.C. § 330.
Page 10 of 51
law.75 The policy statement also concluded that “[t]he Board generally believe[d] that issuing
tokens on open, public, and/or decentralized networks, or similar systems [was] highly likely to
be inconsistent with safe and sound banking practices.”76 The Fed’s posture that banks’
participation was “highly likely” to run afoul of safe and sound banking practices was a sharp
pivot from the internal work that the Fed and other prudential regulators were doing around
banks’ engagement previously.77 In fact, according to documents reviewed by Republican
Committee staff, the prudential regulators spent the majority of 2022 working “to establish
minimum rules and clear standards to ensure bank participation in a stablecoin arrangement
[was] consistent with safety and soundness and existing laws and regulations.”78 However, in
issuing the policy statement, the Federal Reserve significantly restricted banks from holding
digital assets on their balance sheets, and when coupled with other requirements described
below, effectively prohibited banks from participating in the emerging digital asset ecosystem.
Several months later, and almost a year after it issued SR 22-6, on August 8, 2023, the
Federal Reserve sent two additional supervisory letters to member banks.79 The first, SR 23-7,
created a Novel Activities Supervision Program focused on “novel activities related to crypto-
assets, distributed ledger technology (DLT), and complex, technology-driven partnerships with
nonbanks to deliver financial services to customers.”80 SR 23-7 defined “crypto-asset related
activities” broadly to include “[]crypto-asset custody, crypto-collateralized lending, facilitating
crypto-asset trading, and engaging in stablecoin/dollar token issuance or distribution.”81
According to the Federal Reserve, the program was “risk-focused” and intended to “complement
existing supervisory processes, strengthening the oversight of novel activities conducted by
supervised banking organizations.”82 In reality, the Novel Activities Supervision Program
imposed additional regulatory burdens on banking institutions engaging with digital assets and
provided the Fed with additional tools to deny digital asset-related activities.
The second supervisory letter, SR 23-8, provided “a description of the supervisory non-
objection process for state member banks seeking to engage in certain activities involving tokens
denominated in national currencies [referred to as dollar tokens by the Fed and stablecoins by the
OCC] and issued using distributed ledger technology or similar technologies to facilitate
payments.”83 Member banks were required to notify the Federal Reserve and receive a non-
objection letter from supervisory staff before they were able to engage in digital asset-related
activities.84 This left firms in regulatory purgatory.
75
Fed Policy Statement, supra note 73.
76
Id.
77
Id.
78
Documents on file with Republican Committee staff.
79
BD. OF GOVS. OF THE FED. RESERVE SYSTEM, SR 23-7, (2023),
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20250815a1.pdf [hereinafter “SR 23-7”]; SR
23-8, supra note 15.
80
SR 23-7, supra note 79.
81
Id.
82
Id.
83
SR 23-8, supra note 15.
84
Id.
Page 11 of 51
To receive supervisory non-objection, state member banks were required to demonstrate
“appropriate risk management practices for the proposed activities, including having adequate
systems in place to identify, measure, monitor, and control the risks of its activities, and the
ability to do so on an ongoing basis.”85 As part of this process, Federal Reserve supervisory staff
could follow up with financial institutions to “seek additional information in order to better
understand the proposal and the control framework that the state member bank has put in
place.”86 Even if state member banks received supervisory non-objection, they continued to be
“subject to supervisory review and heightened monitoring of these activities.”87 Consequently,
when taken in conjunction with previous policy statements and SRs, this approach ultimately led
to a de facto prohibition on banks engaging with the digital asset ecosystem.
II. The FDIC
The FDIC is tasked with insuring deposits, “[e]xamining and supervising financial
institutions for safety and soundness and consumer protection,” as well as “[m]aking large and
complex financial institutions resolvable, and [m]anaging receiverships.”88 Much like the Federal
Reserve, the FDIC is tasked with “addressing risks in the nation’s financial system,” and
consumer protection,89 which extends to innovative payments technology, such as digital assets.
Notably, the FDIC “is the insurer for all [Insured Depository Institutions] in the United States,
and the primary federal supervisor for state-chartered banks and savings institutions that are not
members of the Federal Reserve System.”90 The FDIC’s supervisory authority includes
examinations, reviewing examination reports, off-site monitoring mechanisms, and participating
in cross-agency examinations.91 More broadly, the FDIC publishes guidance and policy,
including through documents referred to as financial institution letters (FIL), which are
addressed to chief executive offers of financial institutions, generally within the FDIC’s
supervised institutions.92 FILs “may announce new regulations and policies, new FDIC
publications, and a variety of other matters of principal interest to those responsible for operating
a bank or savings association.”93
On May 17, 2021, the FDIC, under the leadership of former Chair Jelena McWilliams—a
President Trump-appointee—released a “Request for Information on Digital Assets,” which
sought “information and comments regarding insured depository institutions’ (IDIs’) current and
85
Id.
86
Id.
87
Id.
88
FDIC Mission, Vision, and Values, FED. DEPOSIT INSURANCE CORP., https://www.fdic.gov/strategic-plans/fdic-
mission-vision-and-values (last visited Nov. 25, 2025).
89
Id.
90
FDIC 2022-2026 Strategic Plan: Supervision Program, FED. DEPOSIT INSURANCE CORP.,
https://www.fdic.gov/strategic-plans/fdic-2022-2026-strategic-plan-supervision-program (last visited Nov. 25,
2025).
91
Id.
92
Financial Institution Letters, FED. DEPOSIT INSURANCE CORP., https://www.fdic.gov/news/financial-institution-
letters (last visited Nov. 25, 2025).
93
Id.
Page 12 of 51
potential digital assts activities.”94 In the request, the FDIC “recognize[d] that there are novel and
unique considerations related to digital assets,” and claimed that it issued the request “to help
inform its understanding of the industry’s and consumers’ interests in this area,” given financial
institutions’ increasing interest in the “emerging digital asset ecosystem.”95 As described below,
the FDIC continued to work on interagency efforts to “enhance the collective knowledge of the
federal banking agencies regarding crypto-asset activities.”96 However, these efforts collapsed
following the departure of then-Chair McWilliams in February 2022, with her replacement,
Martin Gruenberg, “standing down” on “interagency crypto workstreams” by May 2022.97 The
FDIC’s decision to stand down on crypto workstreams was especially perplexing given former
Chair Gruenberg’s public announcement in February 2022 that digital assets were a priority and
that “the agencies will need to provide robust guidance to the banking industry on the
management of prudential and consumer protection risks raised by crypto-asset activities.”98
Under then-Chair Gruenberg, in April 2022, the FDIC issued FIL 16-2022, entitled
“Notification of Engaging in Crypto-Related Activities,” which required all FDIC-supervised
institutions involved in or considering being involved in the digital asset ecosystem to notify the
FDIC.99 According to the FDIC, this request was warranted because digital assets may pose
significant safety and soundness risks, as well as financial stability and consumer protection
concerns.100
Armed with this knowledge, the FDIC then used “pause” letters to force banks to stop
offering banking services to digital asset firms engaging in legal business activities.101 The FDIC
sent “pause” letters to approximately 24 institutions seeking to pursue digital asset-related
activities during the Biden Administration.102 The letters requested banks to delay providing
services to firms in the digital asset ecosystem until the FDIC had sufficient opportunity to
review.103 As justification, the letters pointed to several risks that digital asset-related activities
may pose to a financial institution and its customers, including “[c]onfusion about the role of the
financial institution in crypto transactions; [l]ack of understanding about the nature and risks
associated with crypto-asset products; [i]nability to differentiate between nondeposit products
and traditional banking products, such as deposit accounts; and, [m]isunderstanding the
applicability of [f]ederal deposit insurance coverage.”104
94
Request for Information on Digital Assets, FED. DEPOSIT INSURANCE CORP., https://www.fdic.gov/news/financial-
institution-letters/2021/fil21035.html (last visited Nov. 25, 2025) (Chairman Jelena McWilliams served as the
Chairman of the Federal Deposit Insurance Corporation from June 5, 2028, to February 4, 2022).
95
Press Release, Fed. Deposit Insurance Corp., FDIC Issues Request for Information on Digital Assets (May 17,
2021), https://www.fdic.gov/news/press-releases/2021/pr21046.html.
96
Documents on file with Republican Committee staff.
97
Documents on file with Republican Committee staff.
98
Press Release, Fed. Deposit Insurance Corp., Acting Chairman Martin J. Gruenberg Announces FDIC Priorities
for 2022 (Feb. 7, 2022), https://www.fdic.gov/news/press-releases/2022/pr22015.html.
99
Institutional Letter FIL-16-2022, FED. DEPOSIT INSURANCE CORP. (Apr. 7, 2022),
https://www.fdic.gov/news/inactive-financial-institution-letters/2022/fil22016.html#letter.
100
Id.
101
FDIC Pause Letters, supra note 17.
102
Id.
103
Id.
104
Id. at 23.
Page 13 of 51
Additionally, these letters requested the institutions to provide written responses to
dozens of questions, produce voluminous amounts of documentation, and in some cases, submit
to in-person visitations.105 Regarding the latter, the FDIC claimed the visitations were necessary
to “assess the safety and soundness, consumer protection, and financial stability implications” of
engaging in digital asset-related activities.106
According to FDIC Acting Chair Travis Hill, the letters “show that requests from these
banks were almost universally met with resistance, ranging from repeated requests for further
information, to multi-month periods of silence as institutions waited for responses, to directives
from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related
activity.”107 As a result, “these and other actions sent the message to banks that it would be
extraordinarily difficult—if not impossible—to move forward,” so “the vast majority of banks
simply stopped trying.”108
III. The OCC
As an independent bureau of the U.S. Department of the Treasury, the OCC’s mission
seeks to “ensure that national banks and federal savings associations operate in a safe and sound
manner, provide fair access to financial services, treat customers fairly, and comply with
applicable laws and regulations.”109 As part of this, the OCC “issu[es] banking rules and
regulations and provid[es] legal interpretations and guidance on banks’ corporate decisions that
govern their practices.”110 This includes bank’s decision to engage in digital asset-related
activities.111
At the beginning of the Biden Administration, the OCC reviewed former Acting
Comptroller of the Currency Brian Brooks’s actions.112 This included reviewing national trust
bank charter conditional approvals and interpretive letters (IL) issued during the first Trump
Administration—specifically IL 1170 (banks may provide digital asset custody services), IL
1172 (banks may hold deposits serving as reserves for stablecoins), and IL 1174 (banks may use
distributed ledgers and stablecoins to facilitate and engage in payment activities).113 Those ILs
permitted institutions to “provid[e] cryptocurrency custody services, hold dollar deposits serving
105
Id. at 16-23.
106
Id. at 29.
107
FDIC Pause Letters Press Release, supra note 17.
108
Id.
109
About Us, OFF. OF THE COMPTROLLER OF THE CURRENCY, https://www.occ.gov/about/index-about.html (last
visited Nov. 25, 2025).
110
Id.
111
Financial Technology, OFF. OF THE COMPTROLLER OF THE CURRENCY, https://www.occ.gov/topics/supervision-
and-examination/financial-technology/index-financial-technology.html (last visited Nov. 25, 2025).
112
Anna Hrushka, OCC Will Revisit Crypto Charters, Interpretive Letters, Acting Chief Says, BANKINGDIVE, June 3,
2021, https://www.bankingdive.com/news/occ-will-revisit-crypto-charters-interpretive-letters-acting-chief-
says/601228/ (Acting Comptroller Brian Brooks served as the Acting Comptroller of the Currency from May 29,
2020 until January 14, 2021).
113
IL 1179, supra note 18; OFF. OF THE COMPTROLLER OF THE CURRENCY, INTERPRETIVE LETTER 1170 (2020); OFF.
OF THE COMPTROLLER OF THE CURRENCY, INTERPRETIVE LETTER 1172 (2020); OFF. OF THE COMPTROLLER OF THE
CURRENCY, INTERPRETIVE LETTER 1174 (2021).
Page 14 of 51
as reserves for stablecoins, operat[e] nodes on blockchain networks, and engag[e] in certain
stablecoin activities to facilitate payments.”114
Following its review, the Biden Administration OCC issued IL 1179, which purportedly
“clarified” that banks may provide digital asset custody services, hold deposits serving as
reserves for stablecoins, and use distributed ledgers and stablecoins to facilitate and engage in
payment activities.115 However, the OCC specified that these activities could only be conducted
after a bank notified its supervisory office of its intent to engage in the activities and the bank
received written notification of the supervisory office’s non-objection.116 During this time, the
Biden Administration’s OCC reiterated that actions taken during the Trump Administration’s first
term did not expand the OCC’s chartering authority or otherwise change existing banks’
obligations.117 However, there were several digital asset firms whose conditional approvals to
establish a national trust bank languished without a final determination from the OCC.118
IL 1179 was not a clarification; it was a sudden policy reversal. IL 1179 confirmed that
national banks could engage in digital asset activities “provided the bank can demonstrate, to the
satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe
and sound manner.”119 However, IL 1179 barred supervised institutions from engaging in digital
asset-related activities until the institution received a non-objection letter.120 Therefore, the
OCC’s non-objection was based on the OCC’s “evaluation of a particular bank’s risk
controls.”121 Thus, “[a]n adequate risk management system had to address operational, liquidity,
strategic, and compliance risks.”122 Notably, the question of “how” a bank engages in banking
activities is not a determining factor of the legality of the activity.123
IV. The SEC
The SEC’s mission includes “protecting investors,” as well as “[m]aintaining [f]air,
[o]rderly, and [e]fficient [m]arkets,” and “[f]acilitating [c]apital [f]ormation.”124 The SEC has
114
Jenny Kim et al., OCC Issuances Addressing Crypto-Asset Activities, BOIES SCHILLER FLEXNER, Mar. 25, 2025,
https://www.bsfllp.com/news-events/occ-issuances-addressing-crypto-asset-activities.html [hereinafter “Boies
Schiller Flexner Article”].
115
IL 1179, supra note 18.
116
Id.
117
Id.
118
Leo Schwartz, With Crypto Banking on the Brink, Rumors are Flying, YAHOO!FINANCE, Feb. 8, 2023,
https://finance.yahoo.com/news/crypto-banking-brink-rumors-flying-143748909.html; Leo Schwartz, Crypto bank
Protego didn’t meet all requirements for national trust charter, OCC says, YAHOO!FINANCE, Mar. 17, 2023,
https://finance.yahoo.com/news/crypto-bank-protego-didn-t-165413484.html.
119
IL 1179, supra note 18.
120
Id.
121
Boies Schiller Flexner Article, supra note 114.
122
Id.
123
UnSound: OCC IL 1179 and Its Backwards Creation of New Law, WHITE & CASE, Dec. 1, 2021,
https://www.whitecase.com/insight-alert/unsound-occ-il-1179-and-its-backwards-creation-new-law.
124
SEC Mission, supra note 19.
Page 15 of 51
long failed to provide sufficient clarity to digital asset market participants relating to registration,
custody, and trading, among other activities.125
Under former Chair Gary Gensler, the SEC “claimed essentially limitless jurisdiction
over digital assets,” to include “essentially all digital assets except for Bitcoin.”126 According to
Jennifer Schulp, former Director of Financial Regulation Studies at the Cato Institute’s Center
for Monetary and Financial Alternatives, during her September 2024 testimony before the
Committee’s Subcommittee on Digital Assets, Financial Technology and Inclusion, “[t]he SEC’s
approach ignore[d] the differences between digital assets and traditional securities, and unfairly
view[ed] the entire digital assets industry as a monolith, which it decidedly is not.”127 As a result,
the SEC “subjected U.S. market participants who choose to engage in digital asset-related
activities to extreme regulatory and compliance risk,” by causing a “stop to a host of digital asset
activities in the United States.”128
Like other agencies, the SEC used informal guidance documents to dissuade financial
institutions from engaging with digital asset businesses. For example, on March 31, 2022, the
SEC issued Staff Accounting Bulletin (SAB) 121 in response to an increasing number of entities
safeguarding digital assets.129 SAB 121 required these entities to “disclose detailed information
about the nature and amount of crypto assets being safeguarded,”130 along with “vulnerabilities
related to concentrations in crypto asset safeguarding.”131 SAB 121 also required custodians to
recognize a liability and hold a corresponding offset on their balance sheets, measured at the fair
value of the customer’s digital assets. This accounting approach deviated from established
accounting standards and placed consumers at a greater risk of loss.132 While SABs are not
legally binding, the practical effect was to incentivize financial institutions to avoid providing
custodial services.133 For example, despite the SEC approving spot bitcoin exchange-traded
125
See Press Release, The White House, Fact Sheet: The President’s Working Group on Digital Asset Markets
Releases Recommendations to Strengthen American Leadership in Digital Financial Technology (July 30, 2025),
https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-
releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/.
126
Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets: Hearing before the
Subcomm. on Digital Assets, Financial Technology and Inclusion of the H. Comm. on Financial Serv., 118th Cong.
(2024) (statement of Ms. Jennifer Schulp, Director of Financial Regulation Studies, Center for Monetary and
Financial Alternatives, Cato Institute) [hereinafter “Sept. 18, 2024 Hearing”].
127
Id.
128
Id.
129
SAB 121 and Done: SEC Issues SAB 122 to Rescind Guidance on Safeguarding Crypto Assets, DELOITTE, Jan.
27, 2025, https://dart.deloitte.com/USDART/home/publications/deloitte/heads-up/2025/sec-rescinds-sab-121-issues-
sab-122-crypto-cryptocurrency [hereinafter “Deloitte Article”]; see Staff Accounting Bulletin No. 121, SECURITIES &
EXCHANGE COMM’N, https://www.sec.gov/rules-regulations/staff-guidance/staff-accounting-bulletins/staff-
accounting-bulletin-121 (last visited Nov. 25, 2025) [hereinafter “SAB 121”].
130
Deloitte Article, supra note 129.
131
Id.
132
See Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Gary Gensler, Chair,
Securities & Exchange Comm’n (Sept. 23, 2024) [hereinafter “Sept. 2024 Letter to Gensler”].
133
See Letter from American Bankers Ass’n et al., to Nellie Liang, Under Sec’y for Domestic Finance, Dep’t of the
Treasury, Harrel Pettway, General Counsel, Fed. Deposit Insurance Corp., Mark Van Der Weide, General Counsel,
Bd. of Govs. of the Fed. Reserve System, Benjamin McDonough, Senior Deputy Comptroller and Chief Counsel,
Off. Of the Comptroller of the Currency (June 23, 2022) (“SAB 121 would result in prudential knock-on effects that
Page 16 of 51
products (ETP) and allowing investors access to this asset class through a regulated product,134
SAB 121 essentially served as an obstacle to banking organizations from serving as the
custodian.135
Further, in December 2022, the SEC released staff guidance entitled “Sample Letter to
Companies Regarding Recent Developments in Crypto Asset Markets,” stating that companies
should consider the need to address digital asset market developments in their filings, including
in their business descriptions, risk factors, and management’s discussion and analysis.136
According to the SEC, “[r]ecent bankruptcies and financial distress among crypto market
participants have caused widespread disruption in those markets[,]” and therefore “[c]ompanies
may have disclosure obligations under the federal securities laws related to the direct or indirect
impact that these events and collateral events have had or may have on their business.”137
The SEC engaged in an “enforce first, make rules never” strategy under then-Chair
Gensler.138 However, the SEC’s existing rules were insufficient to regulate the digital asset
ecosystem during then-Chair Gensler’s tenure. For example, the SEC’s registration rules were a
poor fit for digital assets projects “that are, fundamentally, distributed recordkeeping systems
lacking traditional assets or business lines” and also lacking centralized control over the projects
and code.139 Additionally, the SEC reportedly failed to provide guidance on relevant disclosures,
which risked creating market confusion because existing rules asked “issuers for information not
material to the user.”140 SEC rules and guidance under then-Chair Gensler made it “impossible
for digital asset platforms to register and comply with the requirements applicable to securities
exchanges.”141
would make it economically impractical for banking organizations to provide crypto-asset safeguarding activities.
This result should be avoided because the presence of banking organizations in crypto-asset markets ultimately
would benefit investors, financial markets and the broader public.”); see Letter from Patrick McHenry et al.,
Chairman, H. Comm. on Financial Serv., to Martin Gruenberg, Chairman, Fed. Deposit Insurance Corp., Michael
Barr, Vice Chair for Supervision, Bd. of Govs. of the Fed. Reserve System, Michael Hsu, Acting Comptroller of the
Currency, Todd Harper, Chairman, Nat’l Credit Union Admin. (Nov. 15, 2023) [hereinafter “Nov. 15 Letter”] (“SAB
121 meets the definition of a rule under the Administrative Procedure Act (APA), and was never submitted to
Congress or the [Government Accountability Office (GAO)], nor was it subsequently published in the Congressional
Record consistent with the requirements of the Congressional Review Act. Given that the SEC failed to meet these
obligations, SAB 121 should have no legal effect and the Federal banking agencies and National Credit Union
Administration and other financial institutions that provide custody services for digital assets to comply.”).
134
Press Release, Securities & Exchange Comm’n, Statement on the Approval of Spot Bitcoin Exchange-Traded
Products (Jan. 10, 2024), https://www.sec.gov/newsroom/speeches-statements/gensler-statement-spot-bitcoin-
011023.
135
See generally SAB 121, supra note 129.
136
Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, SECURITIES & EXCHANGE
COMM’N, https://www.sec.gov/rules-regulations/staff-guidance/disclosure-guidance/sample-letter-companies-
regarding-recent (last visited Nov. 25, 2025).
137
Id.
138
Sept. 18, 2024 Hearing, supra note 126 (statement of Ms. Jennifer Schulp, Director of Financial Regulation
Studies, Center for Monetary and Financial Alternatives, Cato Institute).
139
Id.
140
Id.
141
Id.
Page 17 of 51
The SEC’s rare attempt at rulemaking threatened further harm to the digital asset
ecosystem. For example, the SEC released two proposed rulemakings in 2022, which would have
expanded the definition of “exchange” to include “Communications Protocol Systems,”142 and
expanded the definition of when securities trades are considered “as part of a regular
business.”143 The latter proposed rule, which was commonly referred to as the Dealer Rule, was
adopted on February 6, 2024.144 These changes were interpreted to extend the SEC’s jurisdiction
beyond existing authority to regulate digital asset market participants, including in decentralized
finance.145 A federal district court vacated the Dealer Rule on November 21, 2024.146
In another example, in 2023, the SEC proposed changes to the custody rule with the
intention of “protect[ing] investors from theft or misappropriation by imposing substantive
requirements on the conduct of investment advisers who have custody of client funds or
securities.”147 The proposal intended to address questions deriving from changes in technology,
advisory services, and custodial practices, which would cover digital assets.148 According to SEC
Commissioner Mark Uyeda, the proposal questioned “whether an investment adviser could ever
satisfy the proposed requirements for crypto assets.”149 Commissioner Uyeda described the
proposal as taking “great pains to paint a ‘no-win’ scenario for crypto assets.”150 Additionally, the
proposed rule would have made it make it impossible for an adviser trading crypto assets on a
platform to comply with the proposed rule.151 SEC Commissioner Hester Peirce referred to the
proposal as “expand[ing] the reach of the custody requirements to crypto assets while likely
shrinking the ranks of qualified crypto custodians.”152 In effect, “[t]his approach to custody
142
The SEC’s January 26, 2022, proposed rulemaking did not mention digital assets once in its 591 pages.
Nevertheless, Congress and the industry expressed concerns that the SEC would sweep decentralized finance (DeFi)
protocols into the rule. Thus, they requested the SEC to provide further clarity on how the rulemaking would
implicate digital assets, especially DeFi. On April 14, 2023, the SEC confirmed that its proposed rulemaking did
include DeFi. See Press Release, Securities & Exchange Comm’n, SEC Reopens Comment Period for Proposed
Amendments to Exchange Act Rule 3b-16 and Provides Supplemental Information (Apr. 14, 2023),
https://www.sec.gov/newsroom/press-releases/2023-77.
143
Letter from Patrick McHenry, Ranking Member, H. Comm. On Financial Serv., to Gary Gensler, Chair, U.S.
Securities & Exchange Comm’n, 1-2 (Apr. 18, 2022) [hereinafter “Apr. 2022 Letter to Gensler”]; see also Letter
from Patrick McHenry, Chairman, H. Comm. on Financial Serv., to Vanessa Countryman, Secretary, U.S. Securities
& Exchange Comm’n (June 13, 2023); Securities & Exchange Comm’n, Further Definition of “As a Part of a
Regular Business” in the Definition of Dealer and Government Securities Dealer in Connection With Certain
Liquidity Providers, 89 Fed. Reg. 14,938 (Feb. 29, 2024) (final rule).
144
Press Release, Securities & Exchange Comm’n, SEC Adopts Rules to Include Certain Significant Market
Participants as “Dealers” or “Government Securities Dealers (Feb. 6, 2024), https://www.sec.gov/newsroom/press-
releases/2024-14.
145
Apr. 2022 Letter to Gensler, supra note 143, at 2.
146
Ethan L. Silver et al., Federal District Court Vacates the Security and Exchange Commission’s Expanded Dealer
Rule, LOWENSTEIN SANDLER L.L.P., Nov. 25, 2024, https://www.lowenstein.com/news-insights/publications/client-
alerts/federal-district-court-vacates-the-security-and-exchange-commission-s-expanded-dealer-rule-broker-dealer.
147
Mark T. Uyeda, Commissioner, Securities & Exchange Comm’n, Statement on Proposed Rule Regarding the
Safeguarding of Advisory Client Assets (Feb. 13, 2023) [hereinafter “Uyeda Statement on Proposed Rule”] (Acting
Chair Mark Uyeda served as the Acting Chairman of the SEC from January 20, 2025, until April 21, 2025).
148
Id.
149
Id.
150
Id.
151
Id.
152
Hester M. Peirce, Commissioner, Securities & Exchange Comm’n, Statement on Safeguarding Advisory Client
Assets Proposal (Feb. 15, 2023).
Page 18 of 51
appear[ed] to mask a policy decision to block access to crypto as an asset class,” and “deviate[d]
from the Commission’s long-standing position of neutrality on the merits of investments.”153
Unworkable, anti-digital assets rulemaking only aided Biden Administration regulators’ efforts to
halt digital asset innovation in the United States.
Although then-Chair Gensler’s SEC refused to create clear, functional regulation for
consumers and investors engaging in the digital asset ecosystem, the SEC was very aware of
Congress’s desire to provide statutory direction to the regulators and the Committee’s efforts to
do so. Nevertheless, at nearly every step, then-Chair Gensler worked to impede or contradict the
Committee’s efforts. This includes:
❖ January 12, 2023 – The Committee established the Subcommittee on Digital Assets,
Financial Technology and Inclusion.154 That same day, the SEC announced
enforcement actions against two digital assets firms.155
❖ March 9, 2023 – The Committee held its first hearing on the Biden Administration’s
approach to digital assets.156 An hour before the hearing, then-Chair Gensler
published an op-ed in The Hill entitled “Getting crypto firms to do their work within
the bounds of the law.”157
❖ April 27, 2023 – The Committee held a second hearing on digital asset regulation.158
During the hearing, then-Chair Gensler tweeted an “Office Hours” video claiming
that most digital assets are securities.159
❖ May 3, 2023 – The Committee and the House Committee on Agriculture (House
Agriculture Committee) announced a joint hearing on digital asset legislation.160 That
153
Uyeda Statement on Proposed Rule, supra note 147.
154
Press Release, H. Comm. on Financial Serv., McHenry Announces Financial Services Subcommittee Chairs and
Jurisdiction for 118th Congress (Jan. 12, 2023),
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408500.
155
Press Release, Securities & Exchange Comm’n, SEC Charges Genesis and Gemini for the Unregistered Offer and
Sale of Crypto Asset Securities through the Gemini Earn Lending Program (Jan. 12, 2023),
https://www.sec.gov/newsroom/press-releases/2023-7.
156
Mar. 9, 2023 Hearing, supra note 1.
157
Gary Gensler, Getting crypto firms to do their work within the bounds of the law, THE HILL, Mar. 9, 2023,
https://thehill.com/opinion/congress-blog/3891970-getting-crypto-firms-to-do-their-work-within-the-bounds-of-the-
law/.
158
The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure: Hearing Before
the H. Comm. on Financial Serv., 118th Cong. (2023).
159
SEC Chair Gary Gensler Archive (@GenslerArchive), X, (Apr. 27, 2023, 12:28 PM),
https://x.com/genslerarchive/status/1651624244445421591?s=46.
160
Press Release, H. Comm. on Financial Serv., HEARING NOTICE: Joint House Financial Services Subcommittee
on Digital Assets, Financial Technology and Inclusion & House Agriculture Subcommittee on Commodity Markets,
Digital Assets, and Rural Development Hearing (May 3, 2023),
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408758.
Page 19 of 51
same day, the SEC released the transcript for then-Chair Gensler’s May 3, 2023
“Office Hours” video.161
❖ June 2, 2023 – The Committee, in conjunction with the House Agriculture
Committee, released the first joint committee legislative product that proposed to
comprehensively regulate the digital asset markets.162 Days later, the SEC announced
charges against a digital asset trading platform.163
❖ June 6, 2023 – The House Agriculture Committee hosted a hearing on digital asset
regulation.164 Moments before the hearing, then-Chair Gensler announced another
enforcement action against a digital asset trading platform testifying at the hearing.165
❖ May 22, 2024 – The House of Representatives voted on H.R. 4763, the Financial
Innovation and Technology (FIT) for the 21st Century Act, which passed by 279-
136.166 The morning of the vote, then-Chair Gensler released a statement expressing
concerns with the legislation despite having refused to provide technical assistance as
requested by the Committee.167
The Biden Administration’s SEC inappropriately used enforcement actions against digital
asset entities to curtail activity. Public reporting suggests that then-Chair Gensler’s SEC had
more than 50 lawyers and staff members dedicated to bringing enforcement actions against
digital asset firms.168 According to SEC Commissioner Peirce, since 2017, the SEC has seen:
[M]any enforcement actions, a number of no-action letters, some
exemptive relief, endless talk about crypto in speeches and
statements, lots of meetings with crypto entrepreneurs[,] many inter-
agency and international crypto working groups, discussion of
certain aspects of crypto in rulemaking proposals, consideration of
crypto-related issues in reviews of registrations statements and other
161
Press Release, Securities & Exchange Comm’n, Office Hours with Gary Gensler: Crypto Platforms & Securities
Laws (May 3, 2023), https://www.sec.gov/newsroom/speeches-statements/office-hours-gary-gensler-crypto-
platforms-securities-laws#_ftn1.
162
Press Release, H. Comm. on Financial Serv., McHenry, Thompson, Hill, Johnson Release Digital Asset Market
Structure Proposal (June 2, 2023),
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408838.
163
Press Release, Securities & Exchange Comm’n, SEC Files 13 Charges Against Binance Entities and Founder
Changpeng Zhao (June 5, 2023), https://www.sec.gov/newsroom/press-releases/2023-101.
164
The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets: Hearing Before H. Comm. on
Agriculture, 118th Cong. (2023).
165
Press Release, Securities & Exchange Comm’n, SEC Charges Coinbase for Operating as an Unregistered
Securities Exchange, Broker, and Clearing Agency (June 6, 2023), https://www.sec.gov/newsroom/press-
releases/2023-102 [hereinafter “SEC-Coinbase Press Release”].
166
H.R. 4763, 118th Cong. (2023).
167
Press Release, Securities & Exchange Comm’n, Statement on the Financial Innovation and Technology for the
21st Century Act (May 22, 2024), https://www.sec.gov/newsroom/speeches-statements/gensler-21st-century-act-
05222024.
168
Matthew Goldstein et al., S.E.C. Moves to Scale Back Its Crypto Enforcement Efforts, N.Y. TIMES, Feb. 4, 2025,
https://www.nytimes.com/2025/02/04/business/sec-crypto-task-force.html [hereinafter “SEC Scales Back Crypto
Enforcement”].
Page 20 of 51
filings, and approval of numerous SRO proposed rule changes to list
crypto exchange-traded products.169
During this period, “the Commission’s handling of crypto [was] marked by legal
imprecision and commercial impracticality.”170 The SEC accused firms of violating securities
laws but failed to provide guidance on how these entities could comply with existing laws. As
stated by Ms. Schulp, “[w]hile not all first-of-their-kind cases are inappropriate, the Commission
should not [have] champion[ed] leading with enforcement when addressing novel applications of
existing rules.”171 Further, SEC Commissioner Uyeda recognized that the regulation by
enforcement method “fails to provide a mechanism for the Commission to consider views by
market participants, which can result in a myopic approach.”172 Additionally Commissioner
Uyeda contended that regulation by enforcement “fails to provide the nuanced and
comprehensive guidance that allows market participants to tailor their practices, and instead
requires regulated entities to divine how the facts and circumstances of another case apply to
their own business model.”173 Most importantly, then-Chair Gensler and the Biden
Administration’s approach stood in the way of actual clarity for digital asset firms, discouraging
them from innovating or doing business in the United States, and left consumers and investors
unprotected when engaging in the digital asset markets.
OPERATION CHOKE POINT 2.0 STIFLED INNOVATION IN THE UNITED STATES.
The Biden Administration’s Operation Choke Point 2.0 had immense harmful
consequences for the digital asset ecosystem. An unclear regulatory framework and mounting
regulatory pressure led to many financial institutions simply refusing to engage with the digital
asset ecosystem to avoid the wrath of the federal regulators. As a result, several financial
institutions stopped providing banking services to digital asset entities.
A primary concern highlighted by Operation Choke Point 2.0 was the lack of due process
afforded to individuals and entities, which negatively impacted digital asset innovation and
company operations. Companies were given very little notice prior to their accounts being closed
by a financial institution. For example, Fred Thiel, the Chief Executive Officer of Marathon
Digital Holdings (MARA), testified to the Committee:
[W]e banked with Signature and when the FDIC shut them down
and Flagstar took over the accounts, none of the crypto accounts
were allowed to be part of those assets acquired, and we were forced
to immediately seek accounts with other banks. We were able to
open an account with another bank, deposited $70 million after
going through all the approval processes, and 6 days later, were told
169
Press Release, Securities & Exchange Comm’n, Comm’r Hester M. Peirce, The Journey Begins (Feb. 4, 2025),
https://www.sec.gov/newsroom/speeches-statements/peirce-journey-begins-020425.
170
Id. (emphasis added).
171
Sept. 18, 2024 Hearing, supra note 126 (statement of Ms. Jennifer Schulp, Director of Financial Regulation
Studies, Center for Monetary and Financial Alternatives, Cato Institute).
172
Id. (citing Mark T. Uyeda, Comm’r, Securities & Exchange Comm’n, Remarks at the “SEC Speaks” Conference
2022 (Sept. 9, 2022) [hereinafter “Commissioner Uyeda Speech”]).
173
Commissioner Uyeda Speech, supra note 172.
Page 21 of 51
we have to shut down the accounts because our bank no longer will
bank crypto companies.
***
We were basically given a policy decision by the bank that they
would no longer service crypto companies, period. And we were
asked to withdraw our money in, I think it was, 24 hours or
72 hours.174
The short notice provided by financial institutions alerting companies of account closure
in some instances particularly strained companies’ ability to meet payment deadlines. It required
moving money to a different financial institution—and many banks were wary of engaging in
digital asset-related activities given the Biden Administration’s aggressive enforcement-first
posture with respect to digital asset firms and its consistent signaling via policy statements, SR
letters, FILs, and more, that digital assets ran afoul of prudential regulatory standards.175 Lawful
businesses need access to the banking system to operate, and the Biden Administration’s
debanking efforts significantly affected entities’ capacity to pay basic operating expenses,
including wages, payroll taxes, employee benefits, rent, utilities, office supplies, travel costs, and
more.176 After being debanked in 2023, Anchorage Digital was forced to lay off 20 percent of its
workforce due to an inability to access essential banking services.177 Small startups and pre-
revenue businesses in the digital asset ecosystem were particularly harmed by the Biden
Administration’s attempt to choke off digital asset firms because they had fewer financial
resources for operations when bank services were abruptly cut off.178
It was not only businesses that were impacted. Individuals involved in the digital asset
ecosystem, including founders and employees of digital asset firms, were personally
debanked.179 In many cases, the personal accounts of digital asset founders, employees, and
investors were also targeted. For example, Hayden Adams,180 the CEO of Uniswap, Brad
Garlinghouse,181 the CEO of Ripple Labs, and Tyler Winklevoss,182 the co-founder of Gemini,
were all personally debanked.
174
Oversight Hearing, supra note 2, at 27-28 (testimony of Mr. Fred Thiel, Chief Executive Office, Marathon
Digital Holdings).
175
See generally Senate Banking Hearing, supra note 37, (testimony of Nathan McCauley, CEO & Co-Founder,
Anchorage Digital).
176
Editorial Team, Operating expenses 101 for small businesses, CLOVER, https://blog.clover.com/operating-
expenses-101-for-small-businesses/ (last visited Nov. 25, 2025).
177
Senate Banking Hearing, supra note 37.
178
a16z crypto editorial, Debanking: What you need to know, A16ZCRYPTO, Dec. 12, 2024,
https://a16zcrypto.com/posts/article/debanking-explained/.
179
See generally Debanking Podcast, supra note 3.
180
Hayden Adams (@haydenzadams), X, (Jan. 23, 2022, 11:52 AM),
https://x.com/haydenzadams/status/1485294362657443842?s=46.
181
Jesse Hamilton, Citibank Debanked Ripple’s Brad Garlinghouse Due to Crypto, Exec Says, COINDESK, Oct. 23,
2024, https://www.coindesk.com/policy/2024/10/23/citibank-debanked-ripples-brad-garlinghouse-due-to-crypto-
exec-says.
182
Tyler Winklevoss (@tyler), X, (Nov. 27, 2024, 3:03 PM), https://x.com/tyler/status/1861863518301004027.
Page 22 of 51
Digital asset innovation also suffered as a result of the Biden Administration’s efforts.
Coinbase’s Mr. Grewal testified that legislative and regulatory “sclerosis” in the United States
“led to a flight from the United States to other jurisdictions.”183 In 2023, for example, MARA
Holdings announced that it was “going to move 50 percent of [their] revenues offshore because
of the regulatory environment [they] were operating in.”184 Mr. Grewal identified European and
Singaporean markets as welcoming of digital asset firms. According to Mr. Grewal, “[t]he
Europeans . . . have passed a market and crypto assets form of legislation that, while not perfect,
offers a reliable, steady framework within which to operation.”185 Singapore, he added, is
“another global leader in cryptocurrency regulation,” that is “drawing capital, jobs, and, frankly,
enthusiasm and creativity that belongs here in the United States.”186
Although Mr. Grewal acknowledged the global nature of the digital asset ecosystem, he
also recognized that “much of the most important innovations actually were developed here in
America.”187 Yet, “through th[e] absence of regulation, this sclerosis, [within the United States]
simply pushed entrepreneurs and risk-takers – appropriate risk-takers, the kind of risk-takers we
used to be proud of in this country – to other parts of the world.”188
COMMITTEE REPUBLICANS HAVE WORKED TO SHINE A LIGHT ON
OPERATION CHOKE POINT 2.0.
The Committee is responsible for exercising oversight of the “organization and operation
of Federal agencies and entities having responsibilities for the administration and execution of
laws and programs addressing subjects within [the Committee’s] jurisdiction,” including the
Federal Reserve, FDIC, OCC, and SEC.189 Throughout the 118th and 119th Congresses,
Committee Republicans have sent more than 20 letters, reviewed thousands of pages of
documents, and held two hearings to uncover the depths of Operation Choke Point 2.0.
I. Hearing I
On March 9, 2023, the Committee’s Subcommittee on Digital Assets, Financial
Technology and Inclusion held a hearing entitled, “Coincidence or Coordinated? The
Administration’s Attack on the Digital Asset Ecosystem.”190 Prior to this hearing, former
Committee Chair Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY), sent a
bicameral letter to the prudential regulators expressing serious concerns with SAB 121 and the
regulator’s approach to regulating digital assets.191 During the hearing, Committee Republicans
183
Oversight Hearing, supra note 2, at 49 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
184
Id. at 54 (testimony of Mr. Fred Thiel, Chief Executive Office, Marathon Digital Holdings).
185
Id. at 49 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
186
Id.
187
Id.
188
Id.
189
Rules of the House of Representatives, R. X(2)(b)(1)(B) (Jan. 2025).
190
Mar. 9, 2023, Hearing, supra note 1.
191
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Michael Barr, Vice Chair for
Supervision, Bd. of Govs. of the Fed. Reserve System, Michael Hsu, Acting Comptroller, Off. of the Comptroller of
the Currency, Martin J. Gruenberg, Chair, Fed. Deposit Insurance Corp., Todd Harper, Chairman of the Board,
National Credit Union Authority (Mar. 2, 2023).
Page 23 of 51
scrutinized the Biden Administration’s actions, including statements, guidance, and proposed
rulemakings, which collectively negatively impacted the digital asset ecosystem.192 Committee
Republicans also highlighted the failures of the Biden Administration’s regulation by
enforcement approach and demonstrated the need for a functional, regulatory framework.193
Republican Committee members encouraged the Biden Administration regulators to promote
innovation through thoughtful and deliberative regulatory action tailored to the actual risks and
benefits of digital assets.194
The witness panel consisted of four experts familiar with the Biden Administration’s
approach to digital assets. The Minority invited Lee Reiners, Policy Director at the Duke
Financial Economics Center at Duke University.
❖ Mr. Mike Belshe, Chief Executive Officer and Co-founder of BitGo
❖ Dr. Tonya Evans, then-Professor, Pennsylvania State Dickinson School of Law
❖ Mr. Jonathan Gould, then-Partner, Jones Day
❖ Mr. Paul Grewal, Chief Legal Officer, Coinbase
Testimony
The witnesses testified that, during the Biden Administration, federal regulators often
used guidance documents to repeatedly emphasize the risks posed by digital assets. While these
guidance documents were public, their application was not.195 Notably, the “confidential nature
of this supervisory relationship facilitates the flow of information between bank and regulator,
but it can also frustrate accountability and oversight.”196 Mr. Gould highlighted the seemingly
binding element of agency guidance:
[A]lthough agency guidance is technically non-binding, banks
rarely challenge or disregard it. The practical consequences of doing
so can be significant in light of the supervisory process through
which guidance is applied. Given these attributes of bank
supervision, generalized and negative statements raising safety and
soundness concerns about particular industry sectors must be made
carefully lest they be interpreted by the public or bank examiners as
an outright prohibition.197
Further, Mr. Gould testified that guidance should provide a path forward, not simply note
the risks associated with a particular activity:
192
Mar. 9, 2023, Hearing, supra note 1.
193
Id.
194
Id.
195
Id.
196
Id. at 8-9 (testimony of Jonathan Gould, Partner, Jones Day).
197
Id. at 9.
Page 24 of 51
The way I think about safety and soundness guidance is that it
provides a path, one path to get to how to do the activity and perform
the activity in a safe and sound manner. I think a lot of the guidance
that we are seeing is more negatively-phrased. It is focusing on kind
of the risks associated, but it is not necessarily showing any kind of
credible path to actually be able to perform whatever the activity is
in a safe and sound manner.198
Witnesses underscored that the Biden Administration’s posture toward digital assets was
to discourage banks from offering services to digital asset firms.
Mr. Emmer. First, in your view, is the [Biden] Administration’s
regulatory posture towards digital assets encouraging or
discouraging financial institutions from offering services to digital
asset firms?
Mr. Gould. Discouraging.199
Post-Hearing Letters
Following this hearing, Committee Republicans sent several letters to federal regulators
regarding their posture towards the digital asset ecosystem.
❖ On March 27, 2023, then-Committee Chair McHenry led a letter to former Secretary
of Treasury Janet Yellen, then-FDIC Chair Gruenberg, Fed Chair Jerome Powell, and
former Acting Comptroller Michael Hsu regarding the Financial Stability Oversight
Council’s (FSOC) coordination of policy relating to digital assets.200
The letter requested communications referring or related to enforcement activities of
digital assets, communications referring or related to joint statements produced regarding digital
assets, and communications referring or related to digital asset “policy sprints” in which the
FSOC members engaged.201
198
Id. at 15.
199
Id. at 22.
200
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Janet Yellen, Secretary, U.S.
Dep’t of the Treasury (Mar. 27, 2023) (Secretary Janet Yellen served as the Secretary of the Treasury from January
26, 2021, until January 20, 2025) [hereinafter “Mar. 2023 Letter to Yellen”]; Letter from Patrick McHenry et al.,
Chairman, H. Comm. on Financial Serv., to Jerome Powell, Chair, Bd. of Govs. of the Fed. Reserve System (Mar.
27, 2023) [hereinafter “Mar. 2023 Letter to Powell”]; Letter from Patrick McHenry et al., Chairman, H. Comm. on
Financial Serv., to Michael Hsu, Acting Comptroller, Off. of the Comptroller of the Currency (Mar. 27, 2023)
[hereinafter “Mar. 2023 Letter to Hsu”] (Acting Comptroller Michael Hsu served as the Acting Comptroller of the
Currency from May 10, 2021, until February 10, 2025); Letter from Patrick McHenry et al., Chairman, H. Comm.
on Financial Serv., to Martin J. Gruenberg, Chair, Fed. Deposit Insurance Corp. (Mar. 27, 2023) [hereinafter “Mar.
2023 Letter to Gruenberg”].
201
Mar. 2023 Letter to Yellen, supra note 200; Mar. 2023 Letter to Powell, supra note 200; Mar. 2023 Letter to Hsu,
supra note 200; Mar. 2023 Letter to Gruenberg, supra note 200.
Page 25 of 51
In response, agencies provided communications between FSOC members related to their
digital asset activities and policy sprint initiatives.202 In addition, the FDIC provided its Crypto
Asset Strategy along with the FDIC’s operational readiness plan and operational considerations
for digital assets.203 Other documents received included drafts of the Joint Statement on Crypto-
Asset Custody Activities, minutes from FSOC meetings, which included discussion on the
“policy sprints,” and the 2022 FSOC Report on Digital Asset Financial Stability Risks and
Regulation.204
The documents revealed that early in the Biden Administration, regulators at the Federal
Reserve, FDIC, and OCC, developed a series of interagency “policy sprints” to “enhance the
collective knowledge of the federal banking agencies regarding crypto-asset activities.”205
The first sprint focused on developing a common taxonomy for
digital assets and agreed upon definitions to ensure a common
language and understanding of the basic terms and concepts for
future discussions. The second sprint centered on understanding use
cases and risks associated with crypto and digital assets. The third
sprint concentrated on potential gaps in regulation and supervision
and prioritizing those gaps for additional consideration.206
By early 2022, the policy sprints appeared to have been dissolved—with little progress made.
This coincided with the departure of then-FDIC Chair McWilliams.207 According to emails, a
few months after then-Chair McWilliams’s departure, FDIC staff emailed OCC staff to explain
that “the FDIC [was] standing down on many of the interagency crypto workstreams, including
custody,” under then-Acting Chair Gruenberg.208
Documents reviewed by Republican Committee staff also revealed that federal agencies
were rushing their work and changing from their initial course—particularly pertaining to the
creation of a federal framework for payment stablecoins—after the Committee released
legislative text in mid-2022. Prior to the release of the Committee’s legislative text, there was a
concerted effort among the relevant agencies to better understand how payment stablecoins work
and draft legislative principles and a legislative framework.209 Both the principles and framework
produced by the agencies were not aligned with many of the provisions of the Committee’s draft
legislation.210 For example, a legislative framework that was circulating only allowed payment
stablecoins to circulate on permissioned blockchain networks and a “draft principles term sheet”
discussed how “payment stablecoins [could be] prohibited from use on secondary markets.”211
202
Documents on file with Republican Committee staff.
203
Documents on file with Republican Committee staff.
204
Documents on file with Republican Committee staff.
205
Documents on file with Republican Committee staff.
206
Documents on file with Republican Committee staff.
207
Timothy Nerozzi, FDIC chair resigns after warning Democrats launching 'hostile takeover', FOX NEWS, Jan. 1,
2022, https://www.foxnews.com/politics/fdic-chair-resigns-democrats-hostile-takeover-agency.
208
Documents on file with Republican Committee staff.
209
Documents on file with Republican Committee staff.
210
Documents on file with Republican Committee staff.
211
Documents on file with Republican Committee staff.
Page 26 of 51
Consequently, when the agencies received the draft legislation from the Committee, the approach
had to change. In one email, a Department of Treasury employee wrote to staffers at the FDIC,
Federal Reserve, CFPB, SEC, and the Commodity Futures Trading Commission (CFTC) in
advance of a meeting the following day, “I wanted to flag that, in light of the fact that we’ve all
recently received text from [House Financial Services Committee] staff, developments in
Congress and the [Committee]’s interest will likely be a bigger part of the discussion than
previously anticipated.”212 The emails suggest that the Biden Administration’s federal regulators
ramped up their efforts after Congress began working on a federal framework for payment
stablecoins. It took three years of work by Congress and a change in Administration before any
payment stablecoin legislation would be enacted.
❖ On April 18, 2023, Committee members sent a letter to then-SEC Chair Gensler
regarding registration for trading platforms.213 Specifically, the members expressed
frustration at then-Chair Gensler for “forc[ing] digital asset market participants into
regulatory frameworks that [were] neither compatible with the underlying technology
nor applicable because the firms’ activities do not involve an offering of
securities.”214 The members further stated that “[w]ithout clear rules of the road,
[then-Chair Gensler’s] push for firms to ‘come in and register’ [was] a willful
misrepresentation of the SEC’s non-existent registration process.”215
Despite the numerous concerns raised by Committee members over several years, then-
Chair Gensler typically refused to acknowledge the incompatibility of the U.S. securities laws
with the digital asset ecosystem and consistently issued enforcement actions against digital asset
firms for failing to register or comply with the securities laws. In fact, of the SEC’s 33
enforcement actions in 2024, 19 of them alleged an unregistered securities offering violation.216
Additionally, on November 14, 2024, in one of his last speeches as Chair, then-Chair Gensler
doubled-down on his assertions that the majority of digital assets are securities and digital asset
platforms are simply refusing to come in and register with the SEC.217 In some instances, then-
Chair Gensler indicated that tailored disclosures and use of exemptive authority could be
appropriate.218 Dangling this possibility undermined the Chair’s position that the law already was
clear or fit for purpose with respect to digital assets. Moreover, the ultimate lack of such reforms
demonstrated the failure of the Biden Administration’s SEC to provide a practical legal
framework for digital assets.
212
Documents on file with Republican Committee staff.
213
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Gary Gensler, Chair, Securities
and Exchange Comm’n (Apr. 26, 2023) [hereinafter “Apr. 2023 Letter to Gensler”].
214
Id.
215
Id.
216
CORNERSTONE RESEARCH, SEC CRYPTOCURRENCY ENFORCEMENT: 2024 UPDATE (Jan. 2025),
https://www.cornerstone.com/wp-content/uploads/2025/01/SEC-Cryptocurrency-Enforcement-2024-Update.pdf.
217
Gary Gensler, Chair, Securities & Exchange Comm’n, Car Keys, Football, and Effective Administration (Nov.
14, 2024).
218
Lydia Beyoud & Yueqi Yang, SEC Weighs Waiving Some Rules to Regulate Crypto, Gensler Says, BLOOMBERG,
July 14, 2022, https://news.bloombergtax.com/financial-accounting/sec-weighs-waiving-some-rules-to-regulate-
crypto-gensler-says; SEC Seeing ‘Lots’ of Crypto Non-Compliance, Says Gensler, BLOOMBERG TV, July 19, 2022,
https://www.bloomberg.com/news/videos/2022-07-19/sec-seeing-lots-of-crypto-non-compliance-says-gensler-video.
Page 27 of 51
❖ On April 25, 2023, then-Committee Chair McHenry wrote to then-FDIC Chair
Gruenberg, Fed Chair Powell, and then-Acting Comptroller Hsu regarding steps taken
by the prudential regulators “to discourage banks from providing services to digital
asset firms and related entities.”219
The letter included a request for records and communications between the prudential
regulators and supervised financial institutions relating to compliance with IL 1179 and the 2023
Crypto-Asset Risks Joint Statement.220 Additionally, it requested all non-public records and
communications between and among employees of the prudential regulators and employees of
state regulatory agencies relating to IL 1179 and the 2023 Crypto-Asset Risks Joint Statement.221
Documents reviewed by Republican Committee staff revealed that prudential regulators’
staff emphasized that “regulators may limit a specific bank’s activities, including digital asset
activities, through conditions on charter approvals, enforcement actions, and other means.”222
The Biden Administration favored this approach over establishing clear rules for the regulation
of digital assets as the “preference is to avoid new rules or issuing wholesale new guidance
unless absolutely necessary. . . .”223
❖ On April 26, 2023, Committee Republicans sent a letter to then-Chair Gensler
regarding the SEC’s failure to conduct a proper public rulemaking process to
determine how digital assets should be evaluated under securities laws.224 Instead,
then-Chair Gensler “spent the SEC’s limited time and resources working with some
market participants more than others.”225
The Committee members requested records and communications regarding the SEC’s
engagement with digital asset platforms and entities “seeking to register with the SEC in order to
facilitate the trading of digital securities[.]”226 Specifically, Committee members requested
records and communications between former SEC Senior Advisor Corey Frayer and former SEC
General Counsel Dan Berkovitz regarding their communications with these entities.227
219
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Jerome Powell, Chair, Bd. of
Govs. of the Fed. Reserve System (Apr. 25, 2023) [hereinafter “Apr. 2023 Letter to Powell”]; Letter from Patrick
McHenry et al., Chairman, H. Comm. on Financial Serv., to Michael Hsu, Acting Comptroller, Off. of the
Comptroller of the Currency (Apr. 25, 2023) [hereinafter “Apr. 2023 Letter to Hsu”]; Letter from Patrick McHenry
et al., Chairman, H. Comm. on Financial Serv., to Martin J. Gruenberg, Chair, Fed. Deposit Insurance Corp. (Apr.
25, 2023) [hereinafter “Apr. 2023 Letter to Gruenberg”].
220
Apr. 2023 Letter to Powell, supra note 219; Apr. 2023 Letter to Hsu, supra note 219; Apr. 2023 Letter to
Gruenberg, supra note 219.
221
Apr. 2023 Letter to Powell, supra note 219; Apr. 2023 Letter to Hsu, supra note 219; Apr. 2023 Letter to
Gruenberg, supra note 219.
222
Documents on file with Republican Committee staff.
223
Documents on file with Republican Committee staff.
224
Apr. 2023 Letter to Gensler, supra note 213.
225
Id.
226
Id.
227
Id. (Senior Advisor Corey Frayer served as a Senior Advisor to Chairman Gensler from December 2021 until
January 2025; General Counsel Dan Berkovitz served as the SEC’s General Counsel from November 2021 until
January 2023).
Page 28 of 51
The SEC failed to produce any documents in response to the letter.
❖ On August 23, 2023, then-Committee Chair McHenry led a letter to Chair Powell
regarding concerns relating to SR 23-7 and SR 23-8.228
The Fed provided internal communications and documents regarding both letters. As
explained above, SR 23-7 focused on changes to supervision at the Federal Reserve. The Fed
concluded that a combination of utilizing fintech-specific activities, or being owned by
individuals or entities engaged or associated with crypto activities were considered novel
banking activities.229 These “changes [were] designed to increase the intensity of supervision,
including changes to the supervisory approach, workforce and System governance.”230 This
change in the Fed’s supervisory approach included “a continuous supervision approach, with
supervisory activities including continuous monitoring and targeted examinations culminating in
an annual assessment.”231 This served as a barrier to banks engaging in digital asset-related
activities.
❖ On November 15, 2023, then-Committee Chair McHenry co-led a bicameral,
bipartisan letter to then-FDIC Chair Gruenberg, then-OCC Acting Comptroller Hsu,
then-Federal Reserve Vice Chair for Supervision Michael Barr, and former National
Credit Union Administration Chair Todd Harper, regarding SAB 121.
The letter referenced an October 2023 Government Accountability Office (GAO) report,
which stated that “it is reasonable to believe that companies may change their behavior to
comply with the staff interpretations found in [SAB 121]” given the SEC’s authority to monitor
public disclosures and pursue enforcement actions against noncompliant entities.232 The
signatories stressed that because “SAB 121 [met] the definition of a rule under the
Administrative Procedure Act [(APA)],” despite failure to comply with APA rulemaking
requirements, “[e]nforcing this noncompliant rule would set a concerning precedent that would
facilitate regulatory gamesmanship to circumvent the APA, effectively allowing the SEC to have
regulatory authority over institutions which Congress did not authorize.”233 As a result, the
signatories requested that the SEC “clarify, through guidance or other action, that SAB 121 is not
enforceable in light of the recent GAO determination.”234
228
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Jerome Powell, Chair, Bd. of
Govs. of the Fed. Reserve System (Aug. 23, 2023).
229
Documents on file with Republican Committee staff.
230
Documents on file with Republican Committee staff.
231
Documents on file with Republican Committee staff.
232
Nov. 15 Letter, supra note 133 (citing GOV’T ACCOUNTABILITY OFF., B-334540, SECURITIES AND EXCHANGE
COMMISSION—APPLICABILITY OF THE CONGRESSIONAL REVIEW ACT TO STAFF ACCOUNTING BULLETIN NO. 121, at 8
(2023), https://www.gao.gov/assets/870/862501.pdf) (Todd Harper was designated as Chairman of the National
Credit Union Administration from January 20, 2021 until January 20, 2025; Michael Barr has served as a member of
the Federal Reserve Board of Governors since July 18, 2022, and served as the Vice Chair for Supervision from July
19, 2022 until February 28, 2025).
233
Id.; see also Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Gene Dodaro,
Comptroller Gen. of the United States, Gov’t Accountability Off. (Aug. 23, 2023) (“Wherein the Committee
requests GAO provide an update into its assessment into whether SAB 121 requires a rulemaking.”).
234
Nov. 15 Letter, supra note 133.
Page 29 of 51
The SEC did not provide any clarity on SAB 121 as requested in this letter.
Although the SEC refused to provide any clarity related to SAB 121, Republican
Committee staff received interagency communications in response to other requests outlined
above and below that provided additional insight around the staff guidance. The documents
revealed that the agencies internally discussed whether SAB 121 was applicable to banks under
the jurisdiction of the prudential regulators.235 Banking regulators’ staff were reluctant to
determine whether banks were subject to SAB 121. SEC staff, however, stated that their “starting
point is that if a bank is carrying out the general activities described in the SAB (i.e.,
safeguarding customer crypto assets), they would be in scope.”236
❖ On May 30, 2024, a bicameral letter was sent to President Biden urging him to sign
the Joint Resolution rescinding SAB 121.237
Despite clear, bipartisan majorities in the House and Senate expressing disapproval of
SAB 121, on May 31, 2024, President Biden vetoed the Joint Resolution.238 Congress was unable
to successfully override President Biden’s veto of the Joint Resolution.239 Despite 228 members
of the U.S. House of Representatives voting in favor of the measure, the House failed to reach
the 290 votes needed to overturn the veto.240 Notably, 183 Democrats voted against the
measure.241
❖ On September 23, 2024, Committee members sent letters to then-FDIC Chair
Gruenberg, Fed Chair Powell, then-Acting Comptroller Hsu, and then-SEC Chair
Gensler seeking additional information on the Agencies’ handling of digital asset-
related activity by supervised institutions, specifically the significant change in the
FDIC’s participation in the “policy sprints” in 2022.242 The Committee members
requested non-public records and communications between the prudential regulators
and the SEC regarding SAB 121, an Interagency Custody Statement, and the need for
additional guidance or regulation related to digital asset custody.243 On the same day,
a bicameral group of Senators and Congressmen, including then-Chair McHenry sent
235
Documents on file with Republican Committee staff.
236
Documents on file with Republican Committee staff.
237
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Joseph R. Biden, President, The
White House (May 20, 2024).
238
H.R. J.Res.109, 118th Cong.
239
Sarah Wynn, US House fails to meet threshold to override Biden’s veto of a resolution to overturn SAB 121, THE
BLOCK, July 11, 2024, https://www.theblock.co/post/304655/us-house-fails-to-meet-threshold-to-override-bidens-
veto-of-a-resolution-to-overturn-sab-121.
240
Id.
241
Id.
242
Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Martin Gruenberg, Chairman,
Fed. Deposit Insurance Corp (Sept. 23, 2024) [hereinafter “Sept. 2024 Letter to Gruenberg”]; Sept. 2024 Letter to
Gensler, supra note 132; Letter from Patrick McHenry et al., Chairman, H. Comm. on Financial Serv., to Jerome
Powell, Chairman, Bd. of Govs. of the Fed. Reserve System (Sept. 23, 2024); Letter from Patrick McHenry et al.,
Chairman, H. Comm. on Financial Serv., to Michael Hsu, Acting Comptroller of the Currency, Off. Of the
Comptroller of the Currency (Sept. 23, 2024)
243
Sept. 2024 Letter to Gruenberg, supra note 242, at 2.
Page 30 of 51
a letter to then-Chair Gensler seeking the rescission of SAB 121 based on GAO’s
finding that it was a rule, and the harm it would do to the digital assets ecosystem.244
Prior to the SEC issuing SAB 121, the prudential regulators were actively working on a
“Joint Statement on Crypto-Asset Custody Services,” to address “key risk management
considerations related to providing custody services for crypto-assets.”245 In a draft and pre-
decisional “discussion outline and outstanding issues list” prepared by the OCC noted that
institutions should “[c]onsider the bank’s risk appetite, including potential strategic risks,
operational risks, legal risks, and reputational risks,” prior to engaging in crypto-asset custody
activities.246 However, in a comment on the document, OCC staff referenced “wider concerns
about the vagueness of reputational risk . . .” and that staff should be careful about the use of the
phrase reputational risk.247 The Biden Administration ultimately did not release a final version
the “Joint Statement on Crypto-Asset Custody Services,” opting instead to release statements
suggesting digital assets were not safe or sound activities for financial institutions to engage
in,248 or required notification before engaging in digital asset activities.249
Despite bipartisan and bicameral efforts to mitigate the harm of SAB 121, the Biden
Administration and its regulators continued to maintain a hostile posture towards digital assets.
II. Hearing II
On February 6, 2025, the Committee’s Subcommittee on Oversight and Investigations
held a hearing entitled, “Operation Choke Point 2.0: The Biden Administration’s Efforts to Put
Crypto in the Crosshairs.”250 The Majority invited three experts familiar with the history of
Operation Choke Point 2.0 and the Biden Administration’s posture towards to digital assets. The
Minority invited Shayna Olesiuk, Director of Banking Policy at Better Markets.
❖ Mr. Paul Grewal, Chief Legal Officer, Coinbase
❖ Mr. Fred Thiel, Chief Executive Officer and Chairman of the Board, MARA
❖ Mr. Austin Campbell, Adjunct Professor, Stern School of Business, New York
University
The witnesses testified regarding the history of Operation Choke Point 1.0, as well as the
consequences of the Biden Administration’s actions. In particular, witnesses testified how the
Biden Administration’s effort to choke off digital asset firms engaging in legitimate activity
curtailed the firms’ ability to pay employees, rent, utilities, and taxes.251
244
See generally Sept. 2024 Letter to Gensler, supra note 132.
245
Documents on file with Republican Committee staff.
246
Documents on file with Republican Committee staff.
247
Documents on file with Republican Committee staff.
248
2023 Crypto-Asset Risks Joint Statement, supra note 62.
249
IL 1179, supra note 18.
250
Oversight Hearing, supra note 2.
251
Id. at 9 (testimony of Mr. Austin Campbell, Adjunct Professor, Stern School of Business).
Page 31 of 51
Testimony
During the hearing, witnesses testified about how bank supervision can be weaponized to
allow for abuse within the system.252 Notably, “the fact that supervision is often confidential,
hidden, and nobody knows exactly what happened itself is a problem that leads to abuse,” and
failure to address it may result in “hearings on Operation Choke Point 3.0 and 4.0 and 5.0
onward to infinity.”253
The hearing highlighted one tool abused by bank examiners: the “management” aspect of
the grading rubric “CAMELS.”254 CAMELS, the supervisory framework first established by the
Federal Financial Institutions Examination Council (FFIEC) in 1979, standardized how financial
institutions were assessed by regulators for their safety, soundness, and overall health.255
Financial institutions are assessed for each of the six categories under CAMELS and then
assigned a composite rating on a scale of 1 (best) to 5 (worst) based on: capital adequacy, asset
quality, management, earnings, liquidity, and sensitivity to market risk.256
Having a poor CAMELS rating can negatively impact financial institutions in several
ways. This includes limitations on business activities and certain funding sources, increases in
insurance premiums, more frequent supervisory examinations, tougher capital requirements, and
more. According to the testimony of Professor Austin Campbell, the management portion of
CAMELS “is a vehicle for abuse . . . an area where the safety and soundness concerns, which on
a standalone basis are legitimate, become warped, and they can be used as a tool to discriminate
against industries, against individuals on any basis people want because it is not discoverable.”257
The confidential nature of banking supervision can lead to rogue examiners abusing this system
and severing disfavored industries from the financial sector.258
Although Biden-era federal regulators attempted to appear impartial to the digital asset
ecosystem, this façade was made apparent following the FDIC’s release of the “pause” letters:
During the same period in which the FDIC was telling banks to halt
activity, the FDIC was also publicly denying they were discouraging
banks from offering services to lawful businesses, including crypto.
For example, in a January 2023 joint statement, the FDIC, along
with other banking regulators, explicitly stated that banking
organizations are neither prohibited nor discouraged from providing
banking services to customers of any specific class or type, as
permitted by law or regulation.259
252
Id. at 10.
253
Id. at 8.
254
Id. at 9.
255
OFF. OF THE COMPTROLLER OF THE CURRENCY, CAMELS RATING AND THEIR INFORMATION CONTENT (2021).
256
Id.
257
Oversight Hearing, supra note 2, at 9-10 (testimony of Mr. Austin Campbell, Adjunct Professor, Stern School of
Business).
258
See generally id.
259
Id. at 12 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
Page 32 of 51
Under the Biden Administration, the federal regulators’ treatment of digital assets
differed significantly from traditional businesses. According to Mr. Campbell:
There was actually a study recently by the [Alternative Investment
Management Association] and John D’Agostino that I reference in
my written testimony, where they went and systematically surveyed
asset management firms, those who were traditional asset managers,
[…], and then those that served crypto.
Among the traditional asset managers, many of whom do engage in
highly risky strategies, and I say this as somebody who has worked
at a traditional asset manager myself, almost none of them had
problems accessing banking service. But among the crypto segment,
even those doing the most vanilla, most boring, long only sort of
strategies, roughly two thirds had problems acquiring banking
services.260
Mr. Campbell testified that subjecting all actors to onerous requirements, such as the
requirement to receive non-objection letters, because of a few bad actors, is a governance issue,
stating, “we are somewhat twisted around here in that the regulators took the stance of, because
some actors in a space are bad, we will therefore debank all of the actors in a space.”261 He
further explained that this was “the exact sort of the line of thinking that [was] promulgated to
justify the actions of the FDIC with regard to Choke Point, but also, you know, was the rationale
behind red lining and the denial of banking services to minorities in the past.”262
According to Mr. Grewal, the non-objection letter requirement was enough to deter banks
from engaging with digital asset firms:
Mr. Loudermilk. If banks must ask regulators for explicit permission
to bank crypto firms, how does this affect their willingness to bank
those firms?
Mr. Grewal. It discourages those banks from even trying in the first
place, Congressman. And the reason is that having to submit those
requests under a well defined framework with a deadline is one
thing, but to simply submit and await an answer whenever and
according to whatever standard the regulator deems fit, that is
something else entirely, and that is something that ultimately
discourages banks from even participating in the first place.263
The Committee discovered that some digital asset entities fought tirelessly to seek clarity
from federal regulators during the Biden Administration. According to Mr. Grewal, for example,
260
Id. at 28 (testimony of Mr. Austin Campbell, Adjunct Professor, Stern School of Business) (emphasis added).
261
Id. at 33.
262
Id. at 34.
263
Id. at 34-35 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
Page 33 of 51
Coinbase sought clarity from the SEC on dozens of occasions following the Commission’s
lawsuit alleging Coinbase was illegally operating a securities exchange, broker, and clearing
agency264:
We have attempted to meet with the SEC on dozens and dozens of
occasions with our own ideas for how regulation might work, and
what standards might apply to the industry as a whole. Over and
over again, we were thwarted. We were told, thank you and go
away.265
The resulting investigation and other enforcement actions like this made firms and the ecosystem
a higher risk for financial institutions. The Biden Administration acknowledged this legal
uncertainty in the 2023 Crypto-Asset Risks Joint Statement, which stated, “[l]egal uncertainties
related to custody practices, redemptions, and ownership rights, some of which are currently the
subject of legal processes and proceedings.”266
Letters
Following the Committee’s February 6, 2025, hearing, Committee Republicans sent a
letter to the FDIC regarding the Agency’s regulatory and supervisory work relating to digital
asset related-activities by supervised financial institutions, as well as three additional letters
requesting the SEC and Federal Reserve to commit to creating straightforward regulation and
policies governing the digital asset ecosystem—and ending debanking.
❖ On February 20, 2025, Committee Republicans sent a letter to FDIC Acting Chair
Hill, requesting consideration of several recommendations that would increase
transparency on policies governing digital assets, while also decreasing the risk of
debanking practices.267
In his response, FDIC Acting Chair Hill “fully agree[d] that banking regulators should
not use ‘reputational risk’ as a basis for supervisory criticisms.”268 The FDIC committed to
increasing objectivity in bank examinations by changing policies that were abused by the Biden
Administration. According to Acting Chair Hill, the FDIC “conducted a review of all mentions of
reputational risk or similar terms in [its] regulations, guidance, examination manuals, and other
policy documents, resulting in a lengthy inventory, with plans to eradicate this concept from [the
FDIC’s] regulatory approach.”269
264
SEC-Coinbase Press Release, supra note 165 (The SEC filed a joint stipulation with Coinbase to dismiss the
ongoing civil enforcement action against Coinbase Inc. and Coinbase Global Inc.).
265
Oversight Hearing, supra note 2, at 29 (testimony of Mr. Paul Grewal, Chief Legal Officer, Coinbase).
266
2023 Crypto-Asset Risks Joint Statement, supra note 62.
267
Letter from French Hill, Chairman, H. Comm. on Financial Serv., to Travis Hill, Acting Chairman, Fed. Deposit
Insurance Corp. (Feb. 20, 2025).
268
Letter from Travis Hill, Acting Chair, Fed. Deposit Insurance Corp., to Dan Meuser, Chairman, Subcomm. on
Oversight & Investigations, H. Comm. on Financial Serv. (Mar. 24, 2025) [hereinafter “Mar. 2025 Letter to Chair
Meuser”].
269
Id. (emphasis added).
Page 34 of 51
❖ On March 31, 2025, Committee members sent a letter to the FDIC, OCC, and Federal
Reserve, requesting a reversal of harmful regulatory actions that “unduly stifled
innovation and effectively prevented financial institutions from engaging in digital
asset-related activities.”270
Then-Acting Comptroller of the Currency Rodney Hood responded by emphasizing the
OCC’s commitment to fostering “responsible innovation.”271 OCC’s response referenced the
OCC’s approach to regulating novel activities as “rest[ing] on the expectation that banks will
have the same strong risk management controls in place as they do for traditional activities.”272
Additionally, the letter referenced action taken by the OCC to address the Biden Administration’s
policies.273
Additionally, Acting Chair Hill sent a response letter to the Committee outlining the
FDIC’s shift toward a more open and flexible approach to innovation and technology, including
digital assets.274 Further, the letter noted that the Corporation is updating its policies, including
withdrawing prior restrictive guidance and clarifying that institutions may engage in permissible
crypto-related activities without obtaining advance approval.275
Committee Republicans commend these and other Trump Administration efforts aimed at
reversing and rectifying harmful Biden Administration regulations and policies targeting the
digital asset ecosystem.
❖ On May 16, 2025, Committee members sent a letter to SEC Chair Paul Atkins,
requesting a briefing on the Commission’s plans to remedy then-Chair Gary Gensler’s
harmful actions toward digital assets and encourage innovation.276
The SEC provided a thorough briefing on the SEC’s Crypto Task Force, described in
detail below.
THE TRUMP ADMINISTRATION IS WORKING TO END OPERATION CHOKE
POINT 2.0.
As described above, the Trump Administration, during the first term, corrected course
after years of unfair debanking actions forced by Obama Administration regulators. In his second
term, President Trump once again promised to end unfair debanking actions. During his
campaign, President Trump said: “As president, I will immediately shut down Operation Choke
270
Letter from French Hill et al., Chairman, H. Comm. on Financial Serv., to Travis Hill et al., Acting Chair, Fed.
Deposit Insurance Corp. (Mar. 31, 2025).
271
Documents on file with Republican Committee staff.
272
Documents on file with Republican Committee staff.
273
Documents on file with Republican Committee staff.
274
Documents on file with Republican Committee staff.
275
Documents on file with Republican Committee staff.
276
Letter from Dan Meuser, Chairman, Subcom. On Oversight and Investigations, H. Comm. on Financial Serv., and
Bryan Steil, Chairman, Subcom. On Digital Assets, Fin. Tech., and Artificial Intelligence, H. Comm. on Financial
Serv., to Paul Atkins, Chair, Securities and Exchange Commission (May 16, 2025).
Page 35 of 51
Point 2.0. They want to choke you out of business; we’re not going to let that happen.”277 Since
taking office, President Trump has remained true to his word. To rectify the Biden
Administration’s hostility towards digital assets, the Trump Administration has taken executive
actions to encourage digital asset innovation and American competitiveness. President Trump has
also carefully selected individuals that understand the need for functional digital asset
regulations. Regulators have followed suit, rolling back harmful Biden Administration guidance
and policies and working to enact a clear regulatory regime for digital assets. Examples of such
actions are listed in the sections below.
I. The White House
❖ One of his first official acts as President was signing E.O. 14178, entitled
“Strengthening American Leadership in Digital Financial Technology.”278 The E.O.
commits to supporting the “responsible growth and use of digital assets, blockchain
technology, and related technologies across all sectors of the economy . . . .”279
Further, the E.O. establishes the President’s Working Group on Digital Asset Markets
(Working Group).280
❖ President Trump appointed Mr. David Sacks, a venture capitalist, as “White House
A.I. & Crypto Czar.”281 Mr. Sacks “guide[s] policy for the Administration in Artificial
Intelligence and Cryptocurrency,” which President Trump identified as “two areas
critical to the future of American competitiveness.”282 Mr. Sacks’s appointment
signaled President Trump’s commitment to creating a functional framework for
digital assets.
❖ Mr. Sacks also leads the Working Group, as established by E.O. 14178.283 The
Working Group is responsible for “propos[ing] a Federal regulatory framework
governing the issuance and operation of digital assets, including stablecoins, in the
United States.”284 All agencies within the Working Group have been tasked with
identifying “all regulations, guidance documents, orders, or other items that affect the
digital asset sector.”285 The Chair of the Working Group is then tasked with deciding
whether to rescind, modify, or keep these identified regulations and documents.286
277
Donald J. Trump, Republican Presidential Candidate, Speech at Bitcoin 2024 (July 27, 2024).
278
Exec. Order No. 14178, 90 Fed. Reg. 8647 (2025) [hereinafter “E.O. 14178”].
279
Id.
280
Id. The Working Group is chaired by the Special Advisor for AI and Crypto. Other members include the
Secretary of the Treasury, Attorney General, Secretary of Commerce, Secretary of Homeland Security, Director of
the Office of Management and Budget, Assistant to the President for National Security Affairs, Assistant to the
President for National Economic Policy, Homeland Security Advisor, Chairman of the Securities and Exchange
Commission, and Chairman of the Commodity Futures Trading Commission. Id.
281
President Donald J. Trump (@realDonaldTrump), Truth Social (Dec. 5, 2024, 7:50 PM),
https://truthsocial.com/@realDonaldTrump/posts/113603133222686186.
282
Id.
283
E.O. 14178, supra note 278.
284
Id.
285
Id.
286
Id.
Page 36 of 51
❖ On July 18, 2025, President Trump signed the GENIUS Act into law.287 The GENIUS
Act “prioritizes consumer protection, strengthens the U.S. dollar’s reserve currency
status, and bolsters our national security.”288 This legislation protects consumers by
creating the first federal regulatory system for payment stablecoins and requiring 100
percent reserve backing with liquid assets, as well as public disclosures regarding the
composition of reserves.289 Additionally, the GENIUS Act enhances national security
by requiring payment stablecoin issuers to create anti-money laundering and
sanctions compliance programs, among other obligations.290
❖ On July 30, 2025, the Working Group released a report (PWG Report) entitled
“Strengthening American Leadership in Digital Financial Technology” that “provides
a roadmap” to fulfill President Trump’s promise “to make America the ‘crypto capital
of the world.’”291 The PWG Report recognizes the “stark” difference in the Trump
Administration’s and the Biden Administration’s approach to digital assets. The PWG
Report states:
The Biden Administration’s approach to crypto was marked by
regulatory overreach[] that countered the American tradition of
embracing new technologies. Operation Choke Point 2.0[] saw
regulators push banks to cut off lawful crypto businesses, effectively
debanking the industry.[] This aggressive strategy of regulation by
enforcement created a hostile environment for crypto
entrepreneurs[] that at times drove their projects and ventures
overseas. Although a great deal of the early innovation in the crypto
space occurred in the United States, much of the industry’s corporate
infrastructure migrated offshore to avoid the unfavorable regulatory
environment. This approach nearly eliminated the opportunity for
the United States to lead in this revolutionary technology due to
mere political whims.292
❖ On August 7, 2025, President Trump signed an E.O. “to ensure that Federal regulators
do not promote policies and practices that allow financial institutions to deny or
restrict services based on political beliefs, religious beliefs, or lawful business
287
Press Release, The White House, Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law (July 18,
2025), https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-
law/; See generally S.1582 (2025).
288
Id.
289
Id.
290
Id.
291
Press Release, The White House, Fact Sheet: The President’s Working Group on Digital Asset Markets Releases
Recommendations to Strengthen American Leadership in Digital Financial Technology (July 30, 2025),
https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-
releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/.
292
THE WHITE HOUSE, STRENGTHENING AMERICAN LEADERSHIP IN DIGITAL FINANCIAL TECHNOLOGY 5-6 (2025),
available at https://www.whitehouse.gov/crypto/.
Page 37 of 51
activities, ensuring fair access to banking for all Americans.”293 The E.O. directs
federal regulators to remove reputational risk and other concepts that enabled Choke
Point 2.0; instructs the Small Business Administration to require financial institutions
under its jurisdiction “make reasonable efforts to reinstate clients and potential
clients” who were unlawfully debanked, in addition to reviewing past policies that
allowed debanking to occur; and requires additional effort to develop a
comprehensive strategy to combat wrongful debanking.294
II. The Federal Reserve
❖ On April 24, 2025, the Fed rescinded the Biden Administration’s 2022 supervisory
letter, SR 22-6, requiring state member banks to notify the Fed prior to engaging in
digital asset-related activities.295 Instead, the Board announced that it will “monitor
banks’ crypto-asset activities through the normal supervisory process.”296 The Fed
also rescinded the Biden Administration’s 2023 supervisory letter, SR 23-8,“regarding
the supervisory non[-]objection process for state member bank engagement in dollar
token activities.”297
❖ The Federal Reserve, with the FDIC, also withdrew two of the 2023 Joint Statements,
which “addressed crypto-risks and liquidity risks to banking organizations resulting
from crypto-asset market vulnerabilities.”298 The action sought “to provide clarity that
banking organizations may engage in permissible crypto-asset activities and provide
products and services to persons and firms engaged in crypto-asset related activities,
consistent with safety and soundness and applicable laws and regulations.”299
❖ On June 4, 2025, Federal Reserve Governor Michelle Bowman was confirmed as the
Fed’s Vice Chair for Supervision; this confirmation demonstrates the Trump
Administration’s focus on reforming the U.S. banking system. Vice Chair Bowman
has been clear about the need for bank supervisors to provide direct and
uncomplicated guidelines to the institutions they monitor.300 She has also been
outspoken about debanking. Prior to her confirmation, Vice Chair Bowman stated that
“bank regulatory policy should be used to address the needs of the unbanked and
293
Press Release, The White House, Fact Sheet: President Donald J. Trump Guarantees Fair Banking for All
Americans (Aug. 7, 2025), https://www.whitehouse.gov/fact-sheets/2025/08/fact-sheet-president-donald-j-trump-
guarantees-fair-banking-for-all-americans/.
294
Id.
295
Press Release, Bd. of Govs. of the Fed. Reserve System, Federal Reserve Board announces the withdrawal of
guidance for banks related to their crypto-asset and dollar token activities and related changes to its expectations for
these activities (Apr. 24, 2025), https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250424a.htm.
296
Id.
297
Id.
298
Press Release, Fed. Deposit Insurance Corp., Agencies Withdraw Joint Statements on Crypto-Assets (Apr. 24,
2025), https://www.fdic.gov/news/press-releases/2025/agencies-withdraw-joint-statements-crypto-assets.
299
Id.
300
Pete Schroeder, Fed’s Bowman vows ‘pragmatic’ rulemaking as top bank regulator, REUTERS, Apr. 10, 2025,
https://www.reuters.com/world/us/feds-bowman-vows-pragmatic-rulemaking-top-bank-regulator-2025-04-10/.
Page 38 of 51
expand the availability of banking services.”301 She expanded, “it should not be used
to limit or exclude access to banking services for legitimate customers and businesses
in a way that is meant to further unrelated policy goals, sometimes referred to as ‘de-
banking’”302
❖ On June 23, 2025, the Federal Reserve Board “announced that reputational risk will
no longer be a component of examination programs in its supervision of banks.”303 As
part of this, the Board will review and remove references to reputation and
reputational risk from supervisory materials, which include examination manuals.304
The Board will also assess appropriate opportunities to replace references to
reputation “with more specific discussions of financial risk.”305 Examiners will also
receive training to ensure consistent implementation of the new protocol.306
❖ On July 14, 2025, the Federal Reserve, with the FDIC and the OCC, issued a joint
statement to provide additional clarity regarding financial institutions’ engagement in
digital asset-related activities.307 The statement highlights potential risk-management
considerations, existing risk-management principles, and reminds banks to engage in
a safe and sound manner and follow existing laws and regulations.308
❖ On August 15, 2025, the Federal Reserve Board withdrew SR 23-7, announcing “it
[would] sunset its novel activities supervision program and return to monitoring
banks’ novel activities through the normal supervisory process.”309
III. The FDIC
❖ On January 10, 2025, Acting Chair Hill released his views on key policy issues,
which included debanking.310 Acting Chair Hill described a “longstanding goal” of
the FDIC as seeking to “decrease the number of people who are unbanked.”311 He
301
Fed’s Bowman suggests easing regulatory uncertainty for mutual banks, ABA BANKING JOURNAL, Jan. 31, 2025,
https://bankingjournal.aba.com/2025/01/feds-bowman-suggests-easing-regulatory-uncertainty-for-mutual-banks/.
302
Id.
303
Press Release, Bd. of Govs. of the Fed. Reserve System, Federal Reserve Board announces that reputational risk
will no longer be a component of examination programs in its supervision of banks (June 23, 2025),
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250623a.htm.
304
Id.
305
Id.
306
Id.
307
Press Release, Off. of the Comptroller of the Currency, Agencies Issue Joint Statement on Risk-Management
Considerations For Crypto-Asset Safekeeping (July 14, 2025), https://occ.gov/news-issuances/news-
releases/2025/nr-ia-2025-68.html [hereinafter “July 2025 Joint Statement”].
308
Id.
309
Press Release, Bd. of Govs. of the Fed. Reserve System, Federal Reserve Board announces it will sunset its novel
activities supervision program and return to monitoring banks’ novel activities though the normal supervisory
process (Aug. 15, 2025), https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250815a.htm.
310
Press Release, Fed. Deposit Insurance Corp., Charting a New Course: Preliminary Thoughts on FDIC Policy
Issues (Jan. 10, 2025), https://www.fdic.gov/news/speeches/2025/charting-new-course-preliminary-thoughts-fdic-
policy-issues.
311
Id. (emphasis added).
Page 39 of 51
explained, “[e]fforts to debank law-abiding customers are unacceptable, regulators
must work to end it, and there is no place at the FDIC for anyone who has pushed –
explicitly or implicitly – banks to stop serving law-abiding customers.”312
❖ As evidence of the Trump Administration’s and Acting Chair Hill’s dedication to
ending unfair debanking practices, in February 2025, the FDIC publicly released the
Biden Administration’s “pause” letters,313 described above in detail. The release of
these letters confirmed the existence of Operation Choke Point 2.0 and demonstrated
the Biden Administration’s efforts to stifle digital asset activity among financial
institutions in the United States.
❖ As referenced above, in response to the Majority’s inquiry, Acting Chair Hill
explained that, as of March 2025, the FDIC had reviewed mentions of reputational
risk or similar terms in [its] regulations, guidance, examination manuals, and other
policy documents, “with plans to eradicate this concept from [the FDIC’s] regulatory
approach.”314
❖ On March 28, 2025, the FDIC issued FIL-7-2025, which rescinds FIL-16-2022, and
“clarifies that FDIC-supervised institutions may engage in permissible crypto-related
activities without receiving prior FDIC approval.”315
❖ As noted above, on April 24, 2025, the FDIC joined the Fed in withdrawing the 2023
Joint Statements, which served to provide clarity to banking organizations regarding
the permissibility of engaging in digital asset-related activities.316
❖ As noted above, on July 14, 2025, the FDIC, with the Federal Reserve and the OCC,
issued a joint statement to provide additional clarity regarding financial institutions’
engagement in digital asset-related activities.317
❖ On July 18, 2025, the FDIC requested comment on a proposal to amend its
Guidelines for Appeals of Material Supervisory Determinations to replace the existing
committee with a standalone office to consider supervisory appeals.318
312
Id.
313
Press Release, Fed. Deposit Insurance Corp., FDIC Releases Documents Related to Supervision of Crypto-
Related Activities (Feb. 5, 2025), https://www.fdic.gov/news/press-releases/2025/fdic-releases-documents-related-
supervision-crypto-related-activities.
314
Mar. 2025 Letter to Chair Meuser, supra note 268 (emphasis added).
315
Press Release, Fed. Deposit Insurance Corp., FDIC Clarifies Process for Banks to Engage in Crypto-Related
Activities (Mar. 28, 2025), https://www.fdic.gov/news/press-releases/2025/fdic-clarifies-process-banks-engage-
crypto-related-activities.
316
Press Release, Fed. Deposit Insurance Corp., Agencies Withdraw Joint Statements on Crypto-Assets (Apr. 24,
2025), https://www.fdic.gov/news/press-releases/2025/agencies-withdraw-joint-statements-crypto-assets.
317
July 2025 Joint Statement, supra note 307.
318
Fed. Deposit Insurance Corp., Guidelines for Appeals of Material Supervisory Determinations, 90 Fed. Reg.
33,942 (July 18, 2025).
Page 40 of 51
❖ On October 7, 2025, the FDIC, with the OCC, issued “a notice of proposed
rulemaking to codify the elimination of reputation risk from their supervisory
programs,” in part by prohibiting agencies from criticizing or taking action against
institutions based on reputational risk.319 It would also prohibit agencies from:
requiring, instructing, or encouraging an institution to close an
account, to refrain from providing an account, product, or service,
or to modify or terminate any product or service on the basis of a
person’s or entity’s political, social, cultural, or religious views or
beliefs, constitutionally protected speech, or solely on the basis of
politically disfavored but lawful business activities perceived to
present reputation risk.320
IV. The OCC
❖ On March 7, 2025, the OCC published IL 1183, which confirmed “that crypto-asset
custody, certain stablecoin activities, and participation in independent node
verification networks such as distributed ledger are permissible for national banks and
federal savings associations.”321 It also rescinded IL 1179, which required OCC-
supervised institutions to receive supervisory non-objection and demonstrate adequate
controls prior to engaging in digital asset-related activities.322 The OCC also
withdrew two 2023 interagency statements, the “Joint Statement on Crypto-Asset
Risks to Banking Organizations,” and the “Joint Statement on Liquidity Risks to
Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities.”323
❖ On March 20, 2025, the OCC announced that it would no longer “examine its
regulated institutions for reputation risk and is removing references to reputation risk
from its Comptroller’s Handbook booklets and guidance issuances.”324
❖ On May 7, 2025, the OCC published IL 1184 to “confirm that national banks and
federal savings associations may buy and sell assets held in custody at the customer’s
direction and are permitted to outsource to third parties bank-permissible crypto-asset
319
Press Release, Off. of the Comptroller of the Currency, Prohibition on Use of Reputation Risk by Regulators:
Notice of Proposed Rulemaking (Oct. 7, 2025), https://occ.gov/news-issuances/bulletins/2025/bulletin-2025-
30.html.
320
Id.
321
Press Release, Off. of the Comptroller of the Currency, OCC Clarifies Bank Authority to Engage in Certain
Cryptocurrency Activities (Mar. 7, 2025), https://www.occ.treas.gov/news-issuances/news-releases/2025/nr-occ-
2025-16.html?ref=thisweekinfintech.com.
322
Id.
323
Press Release, Off. of the Comptroller of the Currency, Bank Activities: OCC Issuances Addressing Certain
Crypto-Asset Activities (Mar. 7, 2025), https://www.occ.gov/news-issuances/bulletins/2025/bulletin-2025-2.html.
324
Press Release, Off. of the Comptroller of the Currency, OCC Ceases Examinations for Reputation Risk (Mar. 20,
2025), https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-21.html.
Page 41 of 51
activities, including custody and execution services, subject to appropriate third-party
risk management practices.”325
❖ As noted above, on July 14, 2025, the OCC, with the Federal Reserve and the FDIC,
issued a joint statement to provide additional clarity regarding financial institutions’
engagement in digital asset-related activities.326
❖ On September 8, 2025, the OCC released a bulletin to banks, clarifying “how it
considers politicized or unlawful debanking in certain licensing filings and in
assessing banks’ records of performance under the Community Reinvestment Act
(CRA).”327 The OCC “considers a bank’s past record and current policies and
procedures to avoid engaging in politicized or unlawful debanking when the agency
evaluates the applicable statutory and regulatory factors for licensing activities,” and
“[d]ebanking considerations are also assessed in determining a bank’s CRA rating.”328
As part of the OCC’s effort to end politicized or unlawful debanking, the OCC also
requested information from its nine largest regulated institutions as it relates to
debanking and updated an online customer complaint portal to make it easier to report
and identify unlawful debanking by regulated institutions.329 A separate bulletin
“encourage[d] its regulated institutions to ensure their policies and procedures align
with E[.]O[.] 14331 to avoid unlawful debanking.”330
❖ On October 7, 2025, the OCC, with the FDIC, proposed to issue a joint notice of
proposed rulemaking that would establish a uniform definition for the phrase “unsafe
or unsound practice” to “promote greater clarity and certainty regarding certain
enforcement and supervision standards by defining them by regulation.”331
V. The SEC
❖ On January 21, 2025, then-SEC Acting Chair Mark Uyeda launched the Crypto Task
Force (Task Force), led by SEC Commissioner Hester Peirce, “dedicated to
developing a comprehensive and clear regulatory framework for crypto assets.”332
The Task Force was established to “help the Commission draw clear regulatory lines,
provide realistic paths to registration, craft sensible disclosure frameworks, and
325
Press Release, Off. of the Comptroller of the Currency, OCC Clarifies Bank Authority to Engage in Crypto-Asset
Custody and Execution Services (May 7, 2025), https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-
2025-42.html.
326
July 2025 Joint Statement, supra note 307.
327
Press Release, Off. of the Comptroller of the Currency, OCC Announces Actions to Depoliticize the Federal
Banking System (Sept. 8, 2025), https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-84.html.
328
Id.
329
Id.
330
Id.
331
Press Release, Off. of the Comptroller of the Currency, Defining ‘Unsafe or Unsound Practice’ and Revising the
Framework for Issuing Matters Requiring Attention and Other Supervisory Communications: Interagency Notice of
Proposed Rulemaking (Oct. 7, 2025), https://occ.gov/news-issuances/bulletins/2025/bulletin-2025-29.html.
332
Press Release, Securities & Exchange Comm’n, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation
of new Crypto Task Force (Jan. 21, 2025), https://www.sec.gov/newsroom/press-releases/2025-30.
Page 42 of 51
deploy enforcement resources judiciously.”333 The Task Force—and the confirmation
of Paul Atkins as SEC Chair334—signal a clear effort by the SEC to return to
commonsense regulation and create a straightforward framework for digital assets.
❖ On January 23, 2025, the SEC published SAB 122, which rescinded SAB 121.335 As
noted above, SAB 121 had required entities to recognize both a liability and a
corresponding asset related to obligations for safeguarding digital assets held for
platform users.336 SAB 122 directs entities to evaluate safeguarding-related
obligations under existing accounting standards. As a result, the responsibility now
falls on entities to assess and recognize such liabilities based on the nature and extent
of their custodial responsibilities.337
❖ The SEC has reportedly sought to reallocate resources by decreasing the size of the
50-person enforcement team targeting digital asset firms.338 Further, the SEC
dismissed with prejudice then-Chair Gensler’s civil enforcement actions against
Coinbase and Kraken.339 The SEC also dismissed cases or closed investigations
against ten other digital asset firms: including Consensys, Crypto.com, CyberKongz,
Gemini, Helium (Nova Labs), Immutable, OpenSea, Robinhood Crypto, Uniswap
Labs, and Yuga Labs.340
❖ On July 31, 2025, the SEC announced “‘Project Crypto’—a Commission-wide
initiative to modernize the securities rules and regulations to enable America’s
financial markets to move on-chain.”341 According to SEC Chair Atkins:
Project Crypto will help ensure that the United States remains the
best place in the world to start a business, develop-cutting-edge
technologies, and participate in capital markets. We will reshore the
crypto businesses that fled our country, particularly those that were
crippled by the previous administration’s regulation-by-
enforcement crusade and ‘Operation [Choke Point] 2.0.’ Whether an
333
Id.
334
Press Release, Securities & Exchange Comm’n, Paul S. Atkins Sworn In as SEC Chairman (Apr. 21, 2025),
https://www.sec.gov/newsroom/press-releases/2025-68.
335
Securities & Exchange Comm’n, Staff Accounting Bulletin No. 122, 17 CFR Part 211 (Jan. 23, 2025).
336
Id.
337
Jai Hamid, SEC officially rescinds anti-crypto SAB 121, CRYPTOPOLITAN, Jan. 23, 2025,
https://www.msn.com/en-us/money/financial-regulation/sec-officially-rescinds-anti-crypto-sab-121/ar-
AA1xKWQm.
338
SEC Scales Back Crypto Enforcement, supra note 168.
339
David Yaffe-Bellany & Matthew Goldstein, Coinbase Says S.E.C. Will Drop Crypto Lawsuit, N.Y. TIMES, Feb.
21, 2025, https://www.nytimes.com/2025/02/21/technology/coinbase-sec-lawsuit.html?smid=nytcore-ios-
share&referringSource=articleShare; Clickout, SEC Agrees in Principle to Drop Lawsuit Against Kraken,
BENZINGA, Mar. 3, 2025, https://www.benzinga.com/content/44098838/sec-agrees-in-principle-to-drop-lawsuit-
against-kraken.
340
See SEC’s Regulatory Policy Shift: 12 Crypto Cases Dropped this Year, COIN EDITION, Apr. 16, 2025,
https://coinedition.com/secs-regulatory-policy-shift-12-crypto-cases-dropped-this-year/.
341
Paul Atkins, Chair, Securities & Exchange Comm’n, American Leadership in the Digital Finance Revolution
(July 31, 2025), remarks available at https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-
revolution-073125.
Page 43 of 51
incumbent or a new entrant, the SEC welcomes all market
participants who are hungry to innovate.342
❖ On August 1, 2025, the SEC announced the Task Force would host several
roundtables across the country to hear from additional stakeholders operating
in the digital asset ecosystem.343 Specifically, the Task Force sought insight
“from representatives of crypto-related projects that have 10 or fewer
employees and are less than two years old.”344
❖ On September 2, 2025, the SEC and the CFTC released a joint staff statement
stating that the SEC’s Project Crypto and the CFTC’s Crypto Sprint are
coordinating “efforts regarding the process for enabling the trading of certain
spot crypto asset products.”345 The statement further clarified “that current law
does not prohibit SEC- or CFTC-registered exchanges from facilitating
trading of these spot crypto asset products.”346
ADDITIONAL EFFORTS ARE NEEDED TO ESTABLISH LONGSTANDING CLARITY
IN THE DIGITAL ASSET ECOSYSTEM.
Committee Republicans continue to collaborate with federal agencies within the
Committee’s jurisdiction to understand the origin of Operation Choke Point 2.0, coordination
among the agencies, the ultimate ramifications on firms in the digital asset ecosystem, and the
impact on innovation in our economy. The Trump Administration has worked to repeal and
overturn the policies of the Biden Administration’s crusade against the digital ecosystem. These
are important steps, but additional work is necessary to establish long lasting clarity in the digital
asset markets. Examples of actions that must be taken in this regard include:
Regulatory Clarity
❖ The SEC, in coordination with Congress, must continue to modernize our
securities laws to oversee the digital asset markets where appropriate. Under
Chair Atkins, the SEC has taken steps to provide, within its existing
authorities, the digital asset ecosystem with regulatory clarity. For example,
the SEC’s Division of Corporate Finance issued a Statement on Stablecoins in
April 2025 asserting that the offer and sale of certain stablecoins are not
securities transactions,347 and the Division of Investment Management issued
a no-action letter in September 2025, stating that it would not recommend
enforcement actions to the Commission with respect to registered advisers and
342
Id.
343
Crypto Task Force: On the Road, SECURITIES & EXCHANGE COMM’N, https://www.sec.gov/about/crypto-task-
force/crypto-task-force-road (last visited Nov. 25, 2025).
344
Id.
345
Press Release, Securities & Exchange Comm’n, SEC-CFTC Joint Staff Statement (Project Crypto-Crypto Sprint)
(Sept. 2, 2025), https://www.sec.gov/newsroom/speeches-statements/sec-cftc-project-crypto-090225.
346
Id.
347
Press Release, Securities & Exchange Comm’n, Statement on Stablecoins (Apr. 4, 2025),
https://www.sec.gov/newsroom/speeches-statements/statement-stablecoins-040425.
Page 44 of 51
regulated funds for holding their digital assets at certain state-chartered
financial institutions.348 There is more work to be done, however, as Congress
seeks to enact a comprehensive framework for digital asset market structure.
❖ The Executive Branch must effectively implement the GENIUS Act. The
Department of Treasury has already put out a Request for Comment on
innovative or novel methods, techniques, or strategies that regulated financial
institutions use, or could potentially use, to detect illicit activity involving
digital assets,349 as well as an Advanced Notice of Proposed Rulemaking on
the implementation of GENIUS.350 The outstanding and forthcoming
rulemakings will grapple with critical issues that will shape the payment
stablecoin ecosystem in the United States and abroad. The primary federal
payment stablecoin regulators must work to meet their regulatory
responsibilities, consistent with Congress’s instructions in statute.
❖ In seeking to provide clarity to financial institutions engaging in digital
asset-related activities, federal financial regulators should prioritize issuing
formal notice and comment rulemaking. The APA requires federal agencies
to engage in a formal rulemaking process for regulations to have the full effect
of the law.351 Notice and comment rulemaking provides market participants
and consumers with the opportunity to participate in the regulatory process
through the submission of opinions, arguments, or data regarding the proposed
regulations.352 Most importantly, the rulemaking process clearly informs
market participants of their governing regulations, which enhances market
stability. Regulating without rules, through guidance and interpretative
statements, creates uncertainty and inconsistency in the application of federal
law. Without clear rules, financial institutions are susceptible to pressure from
radical federal regulators to change lawful business practices or eliminate
services to certain industries due to fear of being targeted for regulatory
enforcement actions.
❖ The Federal financial regulators must reform the CAMELS rating system.
The CAMELS rating system has been criticized for its opaqueness and
subjectivity, which not only causes inconsistency between exams but also
among multiple regulators for the same institution.353 Critics argue that the
management category is often treated by field examiners as an arbitrary catch-
348
SECURITIES & EXCHANGE COMM’N, NO ACTION AND INTERPRETIVE LETTER – SIMPSON THACHER & BARTLETT
LLP (Sept. 30, 2025), https://www.sec.gov/rules-regulations/no-action-interpretive-exemptive-letters/division-
investment-management-staff-no-action-interpretive-letters/simpsonthacherbartlett093025.
349
Dep’t of the Treasury, Request for Comment on Innovative Methods To Detect Illicit Activity Involving Digital
Assets, 90 Fed. Reg. 40,148 (Aug. 18, 2025) (request for comment).
350
Dep’t of the Treasury, GENIUS Act Implementation, 90 Fed. Reg. 45,159 (Sept. 19, 2025) (advanced notice of
proposed rulemaking).
351
5 U.S. Code § 553.
352
Id.
353
See Greg Baer & Bill Nelson, A Better M for CAMELS, BANK POLICY INSTITUTE, Feb. 13, 2025,
https://bpi.com/a-better-m-for-camels/ [hereinafter “Baer & Nelson”].
Page 45 of 51
all and point to how it can be misused to singlehandedly bring down an
institution’s overall composite CAMELS rating.354
Due to the confidential and subjective nature of the CAMELS ratings and
supervisory examination process, financial institutions have few options to
appeal or understand the basis for a low rating.355 Advocates for CAMELS
modernization have pushed for the parameters and considerations behind the
ratings to be as clear, well-defined, and objective as possible.356 As it relates to
the digital asset ecosystem, the CAMELS ratings and supervisory examination
process has become a justification to shape industry behavior to accomplish
Choke Point 2.0 goals.
Key Legislation:
❖ Congress must enact digital asset market structure legislation to cement
lasting certainty and pro-growth, pro-innovation policies in the United
States. The digital asset ecosystem operates within a fragmented regulatory
environment shaped by regulatory gaps or overlapping, and at times,
conflicting approaches from financial regulators. This uncoordinated
framework creates uncertainty, stifles innovation, and pushes legitimate
projects overseas. Meanwhile, American consumers are increasingly exposed
to firms that lack meaningful oversight and investor protections. Modernized
rules are essential to foster innovation, safeguard markets, and maintain U.S.
leadership in the global financial system. While much of the world has
adopted forward-looking policies, U.S. financial regulators under the Biden
Administration spent years engaged in regulation by enforcement rather than
thoughtful policymaking with respect to the digital asset ecosystem.
To address this issue, the Senate must pass—and the President sign into law—
H.R. 3633, the Digital Asset Market Clarity (CLARITY) Act of 2025. This bill
establishes a regulatory framework for digital assets in the United States,
setting clear, functional requirements to protect consumers while fostering
innovation. The CLARITY Act provides a clear definition of a digital
commodity, enabling market participants to understand the classification of
products. It further provides a fit-for-purpose exempt offering pathway for
capital raising transactions involving digital commodities. Additionally, it
establishes a framework for digital commodity exchanges, digital commodity
brokers, and digital commodity dealers to register with the CFTC, including
for SEC registrants engaging in the digital commodity spot market to dual
register with the CFTC. Overall, the CLARITY Act heads off a future
354
See id.; see also Senate Banking Hearing, supra note 37 (statement of Mr. Stephen Gannon, Partner, Davis
Wright Tremaine LLP).
355
See Baer & Nelson, supra note 353; see also Senate Banking Hearing, supra note 37 (statement of Mr. Stephen
Gannon, Partner, Davis Wright Tremaine LLP).
356
See Baer & Nelson, supra note 353; see also Senate Banking Hearing, supra note 37 (statement of Mr. Stephen
Gannon, Partner, Davis Wright Tremaine LLP).
Page 46 of 51
Operation Choke Point 3.0 by reversing the SEC’s regulation by enforcement
approach, enabling market participants to lawfully operate in the U.S. under
clear rules of the road, and making clear that banks may engage in the digital
asset ecosystem. The U.S. House of Representatives passed the CLARITY Act
on July 17, 2025, with a vote of 294 – 134.
❖ Congress should pass H.R. 2702, the Financial Integrity and Regulation
Management (FIRM) Act. This bipartisan bill prohibits the use of
reputational risk as a factor in the supervision of depository institutions and by
eliminating this subjective and undefined metric, the bill aims to prevent
politicization of bank supervision and ensure regulatory focus remains
squarely on material risks related to safety and soundness.
❖ Congress should pass H.R. 4460, the Stop Agency Fiat Enforcement of
(SAFE) Guidance Act. This bill requires federal financial regulatory agencies
to clearly indicate on all guidance documents that such guidance has no legal
force and serves only to clarify existing laws or policies. The bill provides
necessary clarity and predictability to regulated entities and encourages
agencies to engage in the transparent, formal rulemaking process when
altering regulatory expectations.
❖ Congress should pass H.R. 3379, the Halting Uncertain Methods and
Practices in Supervision (HUMPS) Act. This bill requires the FFIEC to
develop formal recommendations to revise the CAMELS rating system.
Federal banking regulators would then be required to implement the
recommendations through joint rulemaking. The legislation establishes
objective, quantifiable criteria for each CAMELS component, revise the
weighting methodology to better reflect actual risk, and either eliminate or
narrow the scope of the more subjective Management component. It also
mandates that composite ratings be derived from a transparent, criteria-based
methodology and requires a public comment period as part of the rulemaking
process.
❖ Congress should work to modernize the supervisory appeals process,
including by passing H.R. 940, the Fair Audits and Inspections for
Regulators’ (FAIR) Exams Act. Although each agency has maintained some
form of an appeals process for decades, the processes have drawn substantial
criticism for being ineffective, lacking true independence, and failing to
adequately guard against potential examiner retaliation. As a result, few
institutions pursue appeals, and even fewer are successful in overturning
supervisory findings. The FAIR Exams Act would create a truly independent
review body and ensure timely and transparent examination procedures. The
bill requires that bank examiners complete examinations within 60 days of the
exit interview and share all materials used to support the supervisory
determination with the institution under review. By improving fairness and
reducing examiner overreach, this bill strengthens prudential supervision.
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CONCLUSION
The Biden Administration’s revival of certain Operation Choke Point tactics presents a
troubling abuse of regulatory authority. Under the guise of risk management and consumer
protection, federal agencies attacked lawful industries and activities that did not align with the
Biden Administration’s political preferences. By utilizing the banking system to enforce
ideological goals, the Administration bypassed Congress, undermined due process, and
threatened the principles of a free market economy. These backdoor efforts to debank politically
disfavored industries corrode the public’s trust in our financial regulators. If left unchecked, this
pattern of targeting disfavored industries through informal pressure and opaque regulatory
scrutiny sets a dangerous precedent—one where financial access depends less on legality and
risk—and more on conforming to political ideologies. This cannot continue.
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APPENDIX
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