President Donald Trump signed an executive order on 7 August to stop what his administration called discriminatory bank practices against the crypto industry.
The order prohibits federal supervisors to use ‘reputation risk’ as a justification to influence the decisions of banks about working with legal companies.
According to the administration, the digital asset sector is disproportionately affected by pressure behind the scenes of regulatory authorities, which leads to abrupt account closures, wage disorders and loss of financial access for authority-abiding companies.
The move is directly focused on what critics ‘Operation Choke Point 2.0’ have dubbed, a term used by the crypto industry to describe a coordinated campaign of informal regulatory pressure.
Although it is not an official program, the term refers to a pattern of supervisory actions that banks would discourage from maintaining digital activa companies, even when those companies comply with existing laws.
The modern chokepoint reflects tactics that were once used in an initiative from Justice’s 2010 era, which wanted to take out access to the Bank for Industries with the High risk of fraud label, including firearms and payment daily loans.
In contrast to its predecessor, however, the newer iteration is largely focused on crypto. Since the beginning of 2023, several companies have reported inexplicable debt, often after vague concerns about risks instead of concrete compliance violations.
Proponents of industry and pro-Crypto legislators have stated that the unfriendly environment has created uncertainty for both startups and institutional players, which limits growth and undermines the credibility of the regulations in the US.
The order of Trump codifies recent movements of the Federal Reserve, FDIC and the office of the Current of the currency, all of which have promised to stop evaluating banks based on reputation factors.
It also comes in accordance with legislation that is discussed in the congress, where legislators have insisted on stricter limits on how regulators supervise politically sensitive or emerging industries.
The order is part of a broader effort from the Trump administration to establish clearer protection for crypto companies that are active within the American financial system.