Bank of America one of the most prominent U.S. banking institutions alleged closure of accounts associated with transactions on Coinbase has sparked concerns within the cryptocurrency community and intensified the tension between traditional financial institutions and the world of cryptocurrencies.
Muneeb Ali, the founder of Stacks, in his recent tweet, claimed that his account, which he had used for Bitcoin investments for 15 years, was closed without warning. His announcement on Twitter generated a strong reaction from the crypto community, with Ali describing it as a “war on Bitcoin & crypto.”
By looking at this incident, Coinbase CEO Brian Armstrong conducted a Twitter poll to investigate if other users had experienced similar closures. Out of 16,701 respondents, 8.9% confirmed they had encountered account closures, while 19.3% reported no such occurrences. According to the poll conducted by Brian Armstrong, over 1,100 people have reported closures of their Bank of America accounts linked to their usage of Coinbase. This added to the contentious relationship between traditional financial institutions and cryptocurrencies.
The situation raises the question of whether Bank of America’s actions are part of an initiative dubbed Operation Choke Point 2.0. Coined by crypto venture capitalist Nic Carter, this term refers to a deliberate effort by banks and regulatory bodies to restrict or deny banking access to politically polarizing industries, including the cryptocurrency sector.
The concept gained prominence when regulatory bodies like the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation issued a joint statement warning banks about increased scrutiny if they engaged with cryptocurrencies. This move was seen as an attempt to limit the growth and influence of the crypto industry by impeding its access to mainstream financial services.
Since the crypto winter of 2022, the crypto market has been volatile and fragile, with incidents like USDC de-pegging and hacks. US regulatory actions have made banks cautious about working with crypto companies like Coinbase. However, there have been no significant reports of Morgan Stanley or Goldman Sachs closing personal bank accounts related to Coinbase or major crypto exchanges.
The Securities and Exchange Commission (SEC) has charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. The SEC alleges that since 2019, Coinbase has unlawfully facilitated the buying and selling of crypto asset securities, resulting in the generation of billions of dollars. These allegations outline the reasons behind the problems faced by Coinbase and its users.