Banks refuse to serve cryptocurrency hedge funds

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Anastasiia Chabaniuk

22.12.2024

Banks refuse to serve cryptocurrency hedge funds — Banks vs. cryptocurrency hedge funds

Over the past three years, cryptocurrency hedge funds have faced significant difficulties accessing banking services, underscoring the phenomenon known in the industry as "Operation Chokepoint 2.0."

According to the Wall Street Journal, citing research from the Alternative Investment Management Association (AIMA), approximately 75% of cryptocurrency hedge funds (120 out of 160 surveyed) reported issues with banking services. These problems included vague explanations and, in some cases, sudden account closures without warning. When reasons were provided, they typically pointed to banks’ reluctance to associate with the volatile cryptocurrency market.

In contrast, a survey of 20 investors from other sectors, such as real estate and private credit, reported no such difficulties. This disparity has raised concerns among cryptocurrency industry leaders.

Paul Grewal, Chief Legal Officer at Coinbase, questioned why cryptocurrency funds face such widespread challenges while other industries do not. He suggested that this could reflect a systematic exclusion of cryptocurrency organizations from banking services.

Matt Hougan, Chief Investment Officer at Bitwise, expressed relief that these issues are now being discussed more openly. According to him, the crypto community has long experienced such challenges, but they were often ignored or dismissed.

“It’s a relief to finally see this issue openly acknowledged. Everyone in the crypto industry witnessed this happening in real-time, but whenever we tried to discuss it, we were either ignored or accused of making it up,” Hougan said.

What is "Operation Chokepoint 2.0"?

Operation Chokepoint 2.0 refers to an initiative aimed at limiting cryptocurrency companies’ access to traditional banking services. The term describes the actions of regulators and banks, which, according to crypto industry representatives, intentionally complicate or entirely block financial institutions from cooperating with cryptocurrency organizations.

The challenges include sudden account closures, refusals to provide services, and a lack of transparency regarding the reasons for such actions. This practice could significantly hinder the development of the cryptocurrency industry by restricting companies’ access to liquidity and essential financial tools.

The term “Chokepoint 2.0” is a reference to the original Operation Chokepoint conducted by the U.S. Department of Justice in the early 2010s. The original initiative aimed to combat illegal activities by cutting off suspicious companies’ access to banking services.

Meanwhile, central banks appear to be favoring legacy systems as enthusiasm for central bank digital currencies (CBDCs) wanes.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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Banks refuse to serve cryptocurrency hedge funds

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