The Silent War Against Bitcoin: How U.S. Financial Regulators Are Weaponizing The Banking Chokepoint

The Pattern Repeats: From Operation Choke Point To Today

Back in 2013, the U.S. Department of Justice launched what would later become known as “Operation Choke Point” — a sprawling effort to squeeze out entire categories of businesses by pressuring banks to cut off their access to financial services. The targets were broad: ammunition dealers, payday lenders, pornography sites, telemarketing firms, and countless others deemed too risky or ideologically undesirable.

The strategy was simple but ruthless. Rather than prosecute specific crimes, regulators worked through the banking system itself — the chokepoint through which all legitimate commerce must flow. Banks faced intense pressure to terminate relationships with entire business categories, regardless of whether individual merchants were actually breaking laws. The result? Multiple lawsuits, federal investigations, and sharp criticism from across the political spectrum.

In 2017, the Trump administration officially declared Operation Choke Point dead. By 2018, regulators promised reforms and additional oversight training. But the playbook? That never disappeared. It was merely dormant.

Today, that same chokepoint strategy has reemerged — this time with Bitcoin and cryptocurrency businesses squarely in the crosshairs.

When The Banking System Became A Weapon (Again)

The 2023 banking crisis provided the perfect cover for what many now call “Operation Choke Point 2.0.”

In March 2023, multiple crypto-focused banks faced sudden collapse or seizure. Silvergate Bank, which had served cryptocurrency clients since 2013, announced voluntary liquidation. Nearly simultaneously, Silicon Valley Bank — which held massive deposits from crypto-adjacent businesses — was seized by California regulators after a catastrophic $42 billion bank run.

Then came Signature Bank.

Signature had made crypto businesses roughly 30% of its deposit base by early 2023. When SVB imploded, the domino effect was swift and predictable. Crypto businesses panicked and withdrew over $10 billion in deposits. On March 12, state and federal authorities shut Signature down entirely — the third-largest bank failure in U.S. history.

But here’s where the pattern becomes undeniable: The U.S. Department of Treasury, Federal Reserve, and FDIC handled the Signature Bank seizure differently than they had handled traditional bank failures. When announcing the takeover of Signature’s assets, regulators deliberately excluded deposits “related to digital-asset banking businesses.”

This wasn’t accidental. This was the chokepoint strategy, weaponized anew.

Barney Frank, who served on Signature’s board and helped draft the post-2008 Dodd-Frank financial reforms, cut through the noise: “I think part of what happened was that regulators wanted to send a very strong anti-crypto message. We became the poster boy because there was no insolvency based on the fundamentals.”

The Wall Street Journal editorial board agreed, stating plainly: “This confirms our suspicions that Signature’s seizure was motivated by regulators’ hostility toward crypto.”

The Regulatory Assault: Coordinated And Escalating

The bank failures provided cover, but the assault on the chokepoint had been underway for months.

In January 2023, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency issued a joint statement framing crypto-assets as systemic risks that banks should avoid. The message was unmistakable: Financial institutions — take deposits from Bitcoin or digital-asset companies at your own peril.

Days later, the White House released its “Roadmap to Mitigate Cryptocurrencies’ Risks,” which explicitly discouraged mainstream financial institutions from engaging with digital assets. The administration warned against allowing pension funds or other regulated entities from gaining crypto exposure, calling it “a grave mistake.”

By February, the Federal Reserve went further, declaring that state member banks would be “presumptively prohibited” from holding crypto assets in any amount. The language was deliberate: Even small positions in Bitcoin or other digital assets would be flagged as unsound banking practice.

Then came May 2023. The Biden administration proposed a Digital Asset Mining Energy (DAME) excise tax — a 30% tax specifically targeting Bitcoin mining operations on the electricity they consume. This wasn’t regulation. This was punishment disguised as environmental policy.

The chokepoint strategy was now multifaceted: Cut off banking access. Discourage financial institution involvement. Tax mining into unprofitability. Strangle the supply side while strangling the on-ramp simultaneously.

Why This Matters For Bitcoin Adoption

The natural question: If Bitcoin is designed to exist outside the traditional financial system, why should Bitcoiners care about regulatory hostility toward the chokepoint?

The answer reveals a fundamental tension in Bitcoin’s current stage of adoption.

While Bitcoin’s core technology functions without banks, most retail participants in developed countries still need to convert fiat currency into Bitcoin. That requires an on-ramp. That requires banks. That requires the chokepoint.

When Caitlin Long, founder of Custodia Bank, sought to build exactly this type of bridge — a regulated institution that could custody Bitcoin while operating within the U.S. financial system — she ran directly into the new regulatory wall.

Long obtained a special-purpose bank charter in Wyoming in 2020, specifically designed to hold Bitcoin custodially. But when she applied for a Federal Reserve master account that would allow her institution to move money efficiently for clients, the Fed simply delayed. And delayed. And delayed.

Months turned into over a year of silence. Then, in late January 2023, press reports revealed the truth: The Federal Reserve had quietly asked all bank charter applicants with “digital assets in their business models” to withdraw their applications. The result was predetermined before any vote was taken.

“Operation Choke Point 2.0 is real,” Long stated in response. “Regulators wanted to send a very strong anti-crypto message, and they did so by pressuring banks to terminate relationships with the digital-asset industry.”

The Offshore Alternative: Why This Creates Bigger Problems

Here’s the bitter irony regulators seem to miss: By choking off legitimate domestic Bitcoin and cryptocurrency businesses, policymakers are virtually guaranteeing that the activity simply moves offshore — where regulatory oversight becomes impossible.

The collapse of FTX in 2022 proved this point catastrophically. FTX, a cryptocurrency exchange based in the Caribbean, operated almost entirely outside U.S. regulatory jurisdiction despite servicing millions of American users. When FTX imploded, customers lost billions, and regulators were nearly powerless to intervene.

Why was FTX able to grow so large despite its obvious risks? Partly because it wasn’t subject to the same banking chokepoint that domestic competitors faced. While U.S.-based crypto companies were being squeezed out of banking relationships, FTX operated in a regulatory vacuum.

The same dynamic will play out with Bitcoin. By making it impossible for domestic Bitcoin businesses to access banking services, regulators aren’t stopping Bitcoin adoption. They’re simply ensuring that the infrastructure moves to jurisdictions where the U.S. has no regulatory reach.

What Happens Next

Brian Morgenstern, head of public policy at Riot Platforms (one of America’s largest Bitcoin mining companies), sees the strategy clearly:

“The White House has proposed an excise tax on electricity use by Bitcoin mining specifically — an admitted attempt to control legal activity they do not like. The only explanation for such inexplicable behavior is deep-rooted bias in favor of the status quo and against decentralization.”

U.S. Senator Bill Hagerty framed it more starkly: “The Biden administration’s financial regulators are attempting to suffocate the domestic crypto economy by de-banking the industry and severing entrepreneurs from the capital necessary to invest here in America. Financial regulators have bought into the false narrative that cryptocurrency-focused businesses solely exist to facilitate illicit activities.”

The solution, according to those working within the system, is straightforward: Education and advocacy.

Morgenstern’s message to Bitcoin supporters: “Engage with your elected officials. Help them understand that Bitcoin’s decentralized ledger technology is democratizing finance, creating faster and cheaper transactions and providing optionality for consumers. This will take time, effort and a lot of communication, but we must work together.”

Hagerty’s warning was starker: “This isn’t an issue where people can afford to be on the sidelines anymore. I encourage those who want to see digital assets flourish in the United States to make your voice heard — at the ballot box or by contacting lawmakers and urging support for constructive policy proposals.”

The Bottom Line

The parallels between Operation Choke Point (2010-2017) and what’s happening now are unmistakable. The strategy is identical: Use banks as chokepoints, pressure them to cut off entire categories of business, and rely on regulatory capture to prevent accountability.

The difference is that this time, the target is Bitcoin and digital assets — technologies that represent a genuine challenge to the Fed’s monetary monopoly and the traditional financial system’s gatekeeping power.

Whether regulators can actually stop Bitcoin through chokepoint tactics is debatable. Bitcoin’s code doesn’t care about U.S. banking policy. Its network will continue to function regardless of regulatory hostility.

But what regulators can stop, at least temporarily, is the domestic infrastructure that helps regular people access Bitcoin through legitimate channels. They can drive innovation offshore. They can hand competitive advantages to countries and jurisdictions with more favorable regulatory environments.

The real question isn’t whether Bitcoin will survive this assault on the chokepoint. It’s whether the U.S. will remain the epicenter of Bitcoin innovation and adoption — or whether it will cede that leadership to more welcoming jurisdictions.

For Bitcoin advocates, the answer depends entirely on whether this new generation of Operation Choke Point can be stopped before it achieves its stated goal: severing Bitcoin and digital-asset businesses from the American financial system.