Around 120 hedge funds engaged in crypto reported hurdles in accessing banking services over the three years, The Wall Street Journal reported on Dec. 20.
The number represents roughly 75% of 160 hedge funds recently surveyed by the Alternative Investment Management Association (AIMA).
The survey highlighted that none of the 20 alternative investors in other asset classes, including real estate and private credit, reported similar challenges. The banking issues ranged from unclear communication to outright termination of relationships.
Among the crypto hedge funds that encountered issues, a little 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 provide explanations, they cited a desire to limit exposure to crypto clients or the industry.
John D’Agostino, head of institutional sales at Coinbase and an AIMA board member, emphasized that while all affected funds eventually found banking partners, they were often smaller or regional institutions.
Operation Chokepoint 2.0
Crypto industry players constantly discuss the existence of an effort by the Joe Biden administration called “Operation Chokepoint 2.0,” which allegedly aims to subdue the crypto industry in the US by limiting access to banking services.
Coinbase chief legal officer Paul Grewal recently released letters from the Federal Deposit Insurance Corporation (FDIC) to banks throughout 2022, where the financial authority urges the institutions to pause or completely stop crypto-related activities.
The documents were obtained through a Freedom of Information Act (FOIA) request filed on Oct. 18, which sought clarification on an alleged 15% deposit cap imposed on crypto-friendly banks. Grewal stated that the letters were proof that Operation Chokepoint 2.0 exists.
Custodia Bank CEO Caitlin Long echoed the sentiment, saying the letters were proof 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 survey further proves that Operation Chokepoint 2.0 is real.
