The Fed's War on Bitcoin: How U.S. Regulators Are Weaponizing the Banking System

Remember Operation Choke Point? The Obama-era scheme where federal agencies systematically pressured banks to cut off “high-risk” businesses — including legal ones like gun dealers and payday lenders?

Welcome to version 2.0, and this time Bitcoin is in the crosshairs.

The Pattern Repeats

It started quietly in early 2023. The Federal Reserve, FDIC, and OCC released a joint statement in January warning banks about “crypto-asset risks.” Sounds reasonable until you realize what happened next: Silvergate Bank (a major crypto lender since 2013) voluntarily liquidated. Silicon Valley Bank got seized. Then Signature Bank — which had 30% of deposits from crypto businesses — was shut down.

Were these banks actually insolvent due to fundamental mismanagement? Sure. But here’s the kicker: the FDIC specifically excluded Signature’s “digital-asset banking businesses” from the deposit rescue, while bailing out SVB’s customers. Barney Frank, who literally wrote the Dodd-Frank Act post-2008, called it out on CNBC: “Regulators wanted to send a strong anti-crypto message.”

The Wall Street Journal editorial board agreed: it was deliberate bias.

The Regulatory Assault

The Biden administration didn’t stop there. In January 2023, a White House “Roadmap” literally told Congress not to let pension funds access crypto markets. In February, the Fed announced it would “presumptively prohibit” banks from holding crypto assets. And in May? A proposed 30% excise tax specifically on Bitcoin mining electricity.

Think that’s a coincidence? Brian Morgenstern, head of policy at Riot Platforms (one of America’s largest Bitcoin miners), doesn’t: “An excise tax on Bitcoin miners specifically — an admitted attempt to control legal activity they don’t like — reveals deep bias against decentralization.”

Why This Matters More Than You Think

Yes, it’s brutal for crypto businesses. But here’s the real problem: it might accidentally create the exact chaos regulators fear.

When you suffocate domestic, regulated Bitcoin companies, they don’t disappear — they go offshore. Look at FTX. Sam Bankman-Fried set up shop in the Caribbean, outside U.S. regulatory reach, and stole billions. If regulators had actually let compliant Bitcoin businesses operate domestically, they’d have oversight and tools to prevent fraud.

Caitlin Long, founder of Custodia Bank (a special-purpose depository for Bitcoin custody in Wyoming), learned this the hard way. After securing a state charter in 2020, she waited years for Federal Reserve approval to access FedWire. Nothing. Then in late January 2023, reporters tipped her off: the Fed had quietly asked all bank charter applicants with digital assets in their business models to withdraw applications. The fix was in before the vote even happened.

“Internet-native money exists,” Long told Bitcoin Magazine. “If regulators won’t enable compliant bridges to traditional finance, the internet will just route around them. And regulators will face even bigger problems.”

The Irony

Bitcoin was literally designed to work without banks. So why should Bitcoiners care about this financial choke hold?

Because in the real world, most people still live under legal systems. Getting paid in Bitcoin? Filing taxes? Cashing out to fiat? All require some bridge to regulated financial infrastructure. Squeeze those bridges hard enough, and you don’t kill Bitcoin — you just move the on-ramp underground.

U.S. Senator Bill Hagerty summed it up: “Operation Choke Point 2.0 refers to the coordinated effort by the Biden administration’s regulators to suffocate the domestic crypto economy by de-banking the industry. Financial regulators have bought into the false narrative that crypto-focused businesses solely facilitate illicit activity. They seem blind to the innovation potential.”

What Happens Now?

The stakes are higher than most realize. Bitcoin adoption in America depends on having some legal path to participate. Right now, that path is closing.

Morgenstern’s advice? “Engage with elected officials. Help them understand Bitcoin is democratizing finance with faster, cheaper transactions and real consumer optionality at a time when centralized finance is in crisis.”

Senator Hagerty was blunter: “This isn’t an issue where people can be on the sidelines anymore. Make your voice heard — at the ballot box or by contacting lawmakers.”

The regulatory war on Bitcoin isn’t about preventing crime. It’s about preserving control. And every policy that pushes Bitcoin underground is a policy that actually makes the system less safe, not more.