OCC

‘Operation Choke Point 2.0’ may have contributed to SVB collapse: Mulvaney

While the existence of “Operation Choke Point 2.0” has not been confirmed, Mick Mulvaney spoke of “rumors” of its existence and the potential side effects of such a policy.

If the United States government really is implementing “Operation Choke Point 2.0” it will hurt financial stability and may have contributed to the collapse of Silicon Valley Bank (SVB) according to Donald Trump’s former Acting White House Chief of Staff, Mick Mulvaney.

“I don’t want to think that the government would actually do that,” Mulvaney said in a March 22 Bloomberg interview in reference to the rumored operation. He did however recall attending hearings on the original Operation Choke Point — a government initiative that aimed to limit certain industries’ access to U.S. banking services.

“You have to wonder if there’s not certain policies that the administration is putting in place that have — perhaps the intended, perhaps the unintended — consequences of raising the risk, and of increasing instability, and did we just see that at SVB?” he added.

“Were people at SVB because they were really good at it, or was there some factor in there that said we’re at SVB because no one else will take us.”

Mulvaney elaborated that he believes crypto played no role in the downfall of SVB and suggested poor risk management was to blame. He implied, however, the pressure being put on U.S. banks to avoid crypto may have contributed to SVB’s collapse.

“Operation Choke Point 2.0” is a term coined by Coin Metrics co-founder Nic Carter and refers to apparently coordinated efforts to discourage banks from holding crypto deposits or providing banking services to crypto firms on the basis of “safety and soundness” for the banking system.

While is it unclear whether “Operation Choke Point 2.0” is an official strategy, Carter has claimed there is evidence supporting its existence.

Related: Yellen defends government intervention to avoid another SVB

In a Feb. 9 blog post, Carter outlined some supposed evidence, highlighting a Jan. 3 joint statement on crypto assets from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), which warned that decentralized blockchain networks are “highly likely to be inconsistent with safe and sound banking practices.”

More recently, critics pointed to the FDIC’s different treatment of crypto assets during the takeover of Signature Bank as further proof of the existence of “Operation Choke Point 2.0.”

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

‘Operation Choke Point 2.0’ may have contributed to SVB’s collapse: Mulvaney

While the existence of “Operation Choke Point 2.0” has not been confirmed, Mick Mulvaney spoke of “rumors” of its existence and the potential side effects of such a policy.

If the United States government really is implementing “Operation Choke Point 2.0,” it will hurt financial stability and may have contributed to the collapse of Silicon Valley Bank, according to Donald Trump’s former acting White House chief of staff, Mick Mulvaney.

“I don’t want to think that the government would actually do that,” Mulvaney said in a March 22 Bloomberg interview in reference to the rumored operation. He did however recall attending hearings on the original Operation Choke Point — a government initiative that aimed to limit certain industries’ access to U.S. banking services.

“You have to wonder if there’s not certain policies that the administration is putting in place that have — perhaps the intended, perhaps the unintended — consequences of raising the risk, and of increasing instability, and did we just see that at SVB?” he added.

“Were people at SVB because they were really good at it, or was there some factor in there that said we’re at SVB because no one else will take us.”

Mulvaney elaborated that he believes crypto played no role in the downfall of SVB and suggested poor risk management was to blame. He implied, however, that the pressure being put on U.S. banks to avoid crypto may have contributed to SVB’s collapse.

“Operation Choke Point 2.0” is a term coined by Coin Metrics co-founder Nic Carter to refer to an apparently coordinated effort to discourage banks from holding crypto deposits or providing banking services to crypto firms on the basis of “safety and soundness” for the banking system.

While is it unclear whether “Operation Choke Point 2.0” is an official strategy, Carter has claimed there is evidence supporting its existence.

Related: Yellen defends government intervention to avoid another SVB

In a Feb. 9 blog post, Carter outlined some supposed evidence, highlighting a Jan. 3 joint statement on crypto assets from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), which warned that decentralized blockchain networks are “highly likely to be inconsistent with safe and sound banking practices.”

More recently, critics pointed to the FDIC’s different treatment of crypto assets during the takeover of Signature Bank as further proof of the existence of “Operation Choke Point 2.0.”

Related: Best and worst countries for crypto taxes — plus crypto tax tips

Crypto bank Anchorage Digital cuts 20% of staff, citing regulatory uncertainty

It’s unclear whether Anchorage Digital’s layoffs relate to the current turmoil in the United States banking sector.

Crypto bank Anchorage Digital has announced it would be letting go of 75 employees, or approximately 20% of its workforce, citing regulatory uncertainty in the United States as a factor in its decision.

In a March 14 statement, Anchorage labeled the layoffs “a strategic realignment to better focus our resources,” pointing to “broad macroeconomic challenges and crypto market volatility” as other factors contributing to its shift in strategy.

It said the market conditions had boosted demand for its product and client assets under custody “are at an all-time high,” but added:

“These same macroeconomic, market, and regulatory dynamics are creating headwinds for our business and the crypto industry.”

Anchorage — which became the first U.S.-based crypto firm to be granted a national trust bank charter from the Office of the Comptroller of the Currency in January 2021 — expressed continued confidence in the digital asset landscape and its ability to build “regulated solutions for digital asset holders.”

The layoffs come at a time when the banking system in the U.S. is in a state of disarray after three regional banks went under in just one week.

Related: Banks collapsing; stablecoins depegging — What is happening? Watch The Market Report live

Silicon Valley Bank, Silvergate Bank and Signature Bank have all gone under since March 8, prompting the Federal Deposit Insurance Corporation to take the extraordinary step of guaranteeing all customer deposits for SVB and Signature. Its standard threshold for guarantees is $250,000.

It’s unclear if the recent developments regarding SVB, Signature, and Silvergate contributed to Anchorage’s decision to cut staff.

Anchorage did not immediately respond to Cointelegraph’s request for comment.

Layoffs within the crypto industry have considerably slowed since the beginning of the year, after the nearly 3,000 positions cut by crypto firms such as crypto exchanges Coinbase and Crypto.com in January were followed by a more muted 570 layoffs for February.

Approach with caution: US banking regulator’s crypto warning

The Office of the Comptroller of the Currency (OCC) said the digital asset industry was maturing but was “not yet robust” in its risk management.

A United States banking industry regulator warned banks of the “emerging risks” of cryptocurrencies saying the sector should take a “cautious approach” and seek permission in some cases when engaging with crypto or crypto firms.

Citing “dislocations” in the crypto market over 2022, the Office of the Comptroller of the Currency (OCC) highlighted what it said were “several key risks” of crypto in its Dec. 8 Semiannual Risk Perspective for Fall 2022 report.

Its three main concerns are that “stablecoins may be unstable,” the crypto industry lacks mature risk management practices and has a high risk of contagion due to the “high degree of interconnectedness.”

The space’s lack of “consistent or comprehensive regulation” and the volatility of crypto, along with the increased range of firms offering “bank-like products and services” using crypto and tokenized assets, were also cited as concerns, which the OCC believes raises questions regarding financial stability.

The depeg and collapse of the TerraUSD Classic (USTC) algorithmic stablecoin in May was given as an example of stablecoins’ “run risk,” and how asset-backed stablecoins also saw minor depeg events as a result.

It highlighted stablecoin backings have “incrementally evolved” since, but believes most “remain susceptible to run risk.”

Discussing risk management, the OCC said practices at crypto firms were maturing but are “not yet robust,” with firms appearing “unprepared for the stresses and surprises” over the past year that saw losses for millions of investors, it added:

“Hacks and outages are frequent, and fraud and scams remain high throughout the industry. In some cases, ownership rights, custody arrangements, and financial representations have created a high degree of confusion.”

The crypto market over 2022 also revealed the industry’s “interconnectedness […] through a variety of opaque lending and investing arrangements,” according to the OCC.

Related: US lawmakers question federal regulators on banks’ ties to crypto firms

It remarked crypto participants “may be engaging in highly leveraged trading” which resulted in the noted contagion risk.

In its advice to banks, the OCC said institutions considering engaging with crypto or crypto companies “should take a careful and incremental approach.”

The OCC advised national banks that crypto-related plans should be discussed “with their supervisory office” before they engage in any activities, as some potentially require permission.

Crypto companies have moved to improve transparency in the wake of the bankruptcy of FTX, with many exchanges introducing proof-of-reserves so users can verify crypto backings, along with some conducting public third-party audits.

OCC makes its staff available for fintech-related discussions

The announcement of one-on-one discussions with the OCC followed the department saying it planned to establish an Office of Financial Technology starting in 2023.

The United States Office of the Comptroller of the Currency, or OCC, has announced its representatives will be available on a one-to-one basis to discuss financial technology.

In a Nov. 3 announcement, the OCC said entities considering fintech products and services, partnerships with banks, or concerns “related to responsible innovation in financial services” have the opportunity for one-hour meetings with its staff between Dec. 14-15. The government office said it will screen requests and proposed topics of discussion and announce virtual meeting times.

The OCC announcement followed the department saying it planned to establish an Office of Financial Technology starting in 2023 in an effort to gain a “deep understanding of financial technology and the financial technology landscape.” The request form for the OCC office hours offered the opportunity for a “candid discussion,” suggesting that a transcript or other details will likely not be available to the public.

In announcing its Office of Financial Technology, the OCC said the proposed office hours will be one of five methods businesses and individuals have to connect with the government department directly. The OCC arm also announced listening sessions, fintech symposiums, participation in financial and banking conferences and public speeches.

Related: OCC Comptroller calls for federal collaboration with crypto intermediaries

The OCC seems to be stretching its regulatory ambitions in its authority over fintech firms. In 2021, the office pushed back against efforts from the Consumer Financial Protection Bureau to charter non-depository fintech firms. Acting OCC head Michael Hsu has also called for regulatory standards on stablecoins, while the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission have clashed while handling regulation and enforcement cases involving digital assets.

Regulators are ‘spending too much time’ on crypto: Comptroller

Michael Hsu stated that it is starting to worry him that “we’re not spending that time and attention on some other things,” like fintech, which he described as the “future.”

United States Acting Comptroller of the Currency (OCC) Michael Hsu has expressed concerns that regulators are spending “too much time on crypto,” rather than more pressing issues, such as technology and banking. 

The crypto skeptic OCC head made the comments during an interview with Reuters on Oct. 13, as he outlined a worry that crypto is “occupying a lot of brain space for an awful lot of people” in the regulatory community.

Hsu has been at the helm of the OCC since May 2021 and serves as the administrator for the federal banking system and chief economic officer of the OCC.

During his tenure, has called for greater supervision of crypto firms and standards around stablecoins, while also stressing the need for a cautious approach to crypto regulation due to “red flags” with the sector’s rapid growth.

“We’re spending too much time on crypto,” he told Reuters, adding that “it’s interesting, it has thorny issues… but relative to other technology and banking issues, I think we’re now kind of overweight crypto.”

Hsu went on to explain that there are other areas that need to be focused on at present, specifically relating to fintech, something which he emphasized last month required immediate oversight to avoid a “severe problem or crisis” due to the sector’s rampant expansion, adding:

“The persistence of the occupation of brain space, it’s starting to worry me now that we’re not spending that time and attention on some other things.”

The OCC head said he thinks fintech is the future, and therefore it needs proper time and considerations to help the sector thrive sustainably.

“This is the future, so let’s do the future right,” he said.

These sentiments are in stark contrast to Hsu’s views on crypto, given that he described the sector as “an immature industry based on an immature technology,” during a lecture at a Harvard Law School roundtable on Oct. 11.

Related: Rep. McHenry gives progress report on stablecoin legislation, says it’s an ‘ugly baby’

Hsu also outlined concerns with the crypto sector’s apparent fear of missing out (FOMO) syndrome which he argued fosters wild speculation as opposed to innovation.

“Promises of innovation and inclusion often mask crypto’s promotion of a gold rush vibe that exploits people’s fear of missing out on the next Google or Amazon.”

“My skepticism of crypto stems from a frustration that the most promising innovations have been crowded out by hype and a fixation on trading,” Hsu added.

Regulators are ‘spending too much time’ on crypto: Comptroller

Michael Hsu stated that it is starting to worry him that “we’re not spending that time and attention on some other things,” like fintech, which he described as the “future.”

United States Acting Comptroller of the Currency (OCC) Michael Hsu has expressed concerns that regulators are spending “too much time on crypto,” rather than more pressing issues, such as technology and banking. 

The crypto skeptic OCC head made the comments during an interview with Reuters on Oct. 13, as he outlined a worry that crypto is “occupying a lot of brain space for an awful lot of people” in the regulatory community.

Hsu has been at the helm of the OCC since May 2021 and serves as the administrator for the federal banking system and chief economic officer of the OCC.

During his tenure, he has called for greater supervision of crypto firms and standards around stablecoins, while also stressing the need for a cautious approach to crypto regulation due to “red flags” with the sector’s rapid growth.

“We’re spending too much time on crypto,” he told Reuters, adding that “it’s interesting, it has thorny issues… but relative to other technology and banking issues, I think we’re now kind of overweight crypto.”

Hsu went on to explain that there are other areas that need to be focused on at present, specifically relating to fintech, something which he emphasized last month that required immediate oversight to avoid a “severe problem or crisis” due to the sector’s rampant expansion, adding:

“The persistence of the occupation of brain space, it’s starting to worry me now that we’re not spending that time and attention on some other things.”

The OCC head said he thinks fintech is the future, and therefore it needs proper time and considerations to help the sector thrive sustainably.

“This is the future, so let’s do the future right,” he said.

These sentiments are in stark contrast to Hsu’s views on crypto, given that he described the sector as “an immature industry based on an immature technology,” during a lecture at a Harvard Law School roundtable on Oct. 11.

Related: Rep. McHenry gives progress report on stablecoin legislation, says it’s an ‘ugly baby’

Hsu also outlined concerns with the crypto sector’s apparent fear of missing out (FOMO) syndrome, which he argued fosters wild speculation as opposed to innovation:

“Promises of innovation and inclusion often mask crypto’s promotion of a gold rush vibe that exploits people’s fear of missing out on the next Google or Amazon.”

“My skepticism of crypto stems from a frustration that the most promising innovations have been crowded out by hype and a fixation on trading,” Hsu added.