Around 120 hedge funds involved in crypto reported barriers to accessing banking services over the three years, The Wall Street Journal reported on December 20.
This number represents approximately 75% of the 160 hedge funds recently surveyed by the Alternative Investment Management Association (AIMA).
The research found that none of the 20 alternative investors in other asset classes, including real estate and private credit, reported similar problems. The banking problems ranged from unclear communication to outright termination of relationships.
Of the crypto hedge funds that got into trouble, just over half were explicitly informed by banks that their relationships would be terminated.
However, the reasons for these decisions were often vague or non-existent. When banks did explain, they cited a desire to limit exposure to crypto clients or the industry.
John D’Agostino, head of institutional sales at Coinbase and AIMA board member, emphasized that while all the funds involved eventually found banking partners, they were often smaller or regional institutions.
Operation Chokepoint 2.0
Crypto industry players are constantly discussing the existence of an effort by the Joe Biden administration called ‘Operation Chokepoint 2.0’, which reportedly aims to subjugate the crypto industry in the US by restricting access to banking services .
Coinbase Chief Legal Officer Paul Grewal recently released letters from the Federal Deposit Insurance Corporation (FDIC) to banks over the course of 2022, where the financial authority is urging institutions to pause or completely halt crypto-related activities.
The documents were obtained through a Freedom of Information Act (FOIA) request filed on October 18, seeking clarification on an alleged 15% deposit limit imposed on crypto-friendly banks. Grewal stated that the letters were proof that Operation Chokepoint 2.0 exists.
Caitlin Long, CEO of Custodia Bank, echoed the sentiment, saying the letters were evidence of a coordinated effort to hinder the crypto industry in the US.
Austin Campbell, CEO of global digital payments company WSPN, shared that the AIMA research further proves that Operation Chokepoint 2.0 is real.