Crypto advocate Nic Carter has recently exposed how the Federal Reserve played a significant role in driving Silvergate Bank to bankruptcy as part of a broader crackdown on crypto-friendly institutions under “Operation Choke Point 2.0.” Carter claimed that the coordinated effort by Biden administration regulators, including the Fed, FDIC, and OCC, led to the eventual demise of Silvergate, despite the bank’s solvency even after the FTX fallout.
Fed’s Mandate and Silvergate’s Downfall
In early 2023, U.S. financial regulators launched a concerted effort to target crypto-friendly banks, with Silvergate and Signature Bank becoming key casualties of what Carter refers to as “Operation Choke Point 2.0.” Under this operation, the Fed reportedly pressured Silvergate to reduce its crypto-related deposits to less than 15% of its business. Carter insists that this directive was the final blow that pushed Silvergate into filing for Chapter 11 bankruptcy.
Despite reports suggesting Silvergate’s exposure to FTX and market losses contributed to its downfall, Carter emphasized that the bank remained solvent, even after suffering major redemptions following FTX’s collapse. He refuted claims that Silvergate’s failure was market-driven, asserting instead that it was regulatory pressure that led to its closure. According to Carter, the bank was “murdered” by the Fed’s behind-the-scenes actions rather than succumbing to financial mismanagement.
Regulatory Crackdown Confirmed
In Silvergate’s Chapter 11 bankruptcy proceedings, former executive Elaine Hetric corroborated Carter’s statements. Hetric confirmed that while Silvergate weathered the crypto market turbulence, regulatory directives—specifically the mandate to significantly reduce its involvement in the crypto sector—were the deciding factor in the bank’s closure.
Hetric’s affidavit also highlighted a broader regulatory effort that involved excluding crypto-related business lines from bank acquisitions, further supporting the claim that Silvergate’s downfall was a result of a deliberate crackdown. Carter called this operation “blatantly illegal,” drawing parallels to the original “Operation Choke Point” under the Obama administration, which targeted industries considered high-risk by regulators.
A Legal Battle on the Horizon
Carter’s revelations have sparked renewed criticism of the government’s handling of crypto regulations. Coinbase Chief Legal Officer Paul Grewal echoed these sentiments, denouncing the regulators’ high-handedness in managing the crypto sector. Grewal also mentioned Coinbase’s ongoing Freedom of Information Act (FOIA) lawsuit, seeking transparency regarding the government’s crypto policies. Additionally, he raised concerns over the SEC’s ambiguous use of the term “crypto asset security” ahead of a critical House Financial Services Committee hearing.
Carter and other industry insiders suggest that the collapse of Silvergate is just the beginning of a larger effort by federal regulators to curb the growth of crypto banking, with potential long-term effects on the future of cryptocurrency in the U.S.
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