House Republicans Scrutinize Biden's Crypto Policies Amid Allegations of Operation Choke Point Revival

Allegations of Regulatory Overreach

A recent congressional report led by Representative French Hill accuses federal regulators of constraining the U.S. crypto industry, echoing the controversial Operation Choke Point. The report alleges that unclear regulations and informal pressures led to over 30 digital asset firms losing banking access.

Banking Oversight and Crypto Firms

The report describes a cautious banking culture influenced by regulatory warnings, leading banks to limit exposure to crypto clients. Hill draws parallels to ongoing congressional efforts on digital asset policy, highlighting similarities to the Obama-era initiative.

Originally targeting industries like payday lending, Operation Choke Point faced bipartisan criticism for its impact on lawful businesses. The current report underscores similar concerns within the crypto sector, where inconsistent guidance left firms in regulatory limbo.

Impact on Innovation and Industry

Subcommittee Chairman Bryan Steil agreed with the findings, emphasizing the negative effects on innovation and employment. He pointed out that banking access issues were more a result of regulatory decisions than the legality of the businesses.

Challenges in Crypto Regulation

The report also critiques the SEC's enforcement-centric approach, which contributed to uncertainty for crypto businesses. Banking agencies, including the Federal Reserve, imposed restrictions that hindered institutional involvement in digital assets.

Regulators often warned banks about crypto market volatility, a concern heightened by significant failures and fraud cases in 2022. These issues shaped supervisory attitudes towards digital asset companies.

During Biden's presidency, Bitcoin experienced extreme fluctuations, affecting the crypto banking landscape. In 2023, several crypto-focused banks collapsed, highlighting the sector's instability.

Congress is currently advancing digital asset legislation, including the nation's first stablecoin law and a broader market structure bill pending in the Senate.

Hill's report also highlights actions by Trump-era regulators to retract supervisory documents issued under Biden, suggesting a potential easing of banking restrictions on digital asset businesses.