"Suffocation Point Action 2.0" ends, what does the bank loosening mean to the crypto market?

On April 25, the Federal Reserve announced a major decision: to revoke the 2022 regulatory guidelines on bank crypto assets and US dollar token business, abolish the relevant "regulatory no objection" procedures in 2023, and withdraw from the previous policy statement on the risks of crypto assets business issued with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Currency Supervision (OCC).

Marginalized Crypto Industry's Suffocation Point Action 2.0

"Choke Point 2.0" is a general term for a series of banking regulatory policies in the crypto industry during the Biden administration. This name comes from the Obama-era "suffocation point action" and refers to achieving regulatory goals by putting pressure on banks to cut off financial services in specific industries.

In the crypto market, Suffocation Point Action 2.0 generally refers to the fact that the major U.S. financial regulators, the Federal Reserve, FDIC and OCC, have strongly dissuaded banks from crypto asset-related businesses through a series of guidance and policy statements, and indirectly restricted the connection between crypto companies and traditional banking systems.

It all started in 2022, when the Federal Reserve issued a regulatory letter requiring state member banks to make advance reports before conducting crypto assets business. This seems to be a procedural requirement, but in fact it has greatly raised the threshold for banks to enter the crypto field.

By the beginning of 2023, regulatory efforts have been further escalated. The Federal Reserve, FDIC and OCC jointly issued a statement, clearly pointing out that issuing or holding crypto assets on public and decentralized networks is "very likely to be inconsistent with safe and sound banking practices." In the same year, regulators also required banks to obtain "no objection" permission from regulators when engaging in US dollar tokens (i.e. stablecoins). This procedure is not only complex and time-consuming, but also provides veto for regulators.

Therefore, many people call this wave of regulatory pressure "Suffocation Point Action 2.0". In an in-depth analysis, Nic Carter, former crypto asset analyst at Fidelity Investment, described this series of actions as "a sophisticated and extensive suppression of the crypto industry through the banking system."

He pointed out that the goal of regulators is to cut off the cryptocurrency system by increasing the difficulty of banking services to the cryptocurrency industry. This not only restricts the account opening and payment channels of crypto companies, but also has a serious impact on the fiat currency entry and exit channels of stablecoin issuers and exchanges. Some crypto companies are even at risk of "complete loss of banking services", and the liquidity of stablecoins and the operation of exchanges are also threatened.

FTX crash: the fuse of regulatory high pressure

Action Suffocation Point 2.0 is closely linked to the November 2022 FTX exchange crash. The FTX crash cost customer funds billions and market confidence fell to the bottom. The crypto credit crisis in 2022 has not had much impact on traditional finance, but regulators obviously need to prevent problems before they happen and take action first. Therefore, the regulatory system prevents risks from swaying the banking system by limiting the contact between banks and the crypto industry.

For crypto-friendly banks, it is naturally the first to bear the brunt of the regulatory focus. Silvergate and Signature were one of the few banks willing to serve crypto customers at the time, so they were under tremendous pressure. In December 2022, Senators Elizabeth Warren, John Kennedy and Roger Marshall wrote a letter to Silvergate for failing to discover suspicious activities by FTX and its affiliate Alameda Research.

Silvergate then plunged from a $160 high in March 2022 to $11.55 in January 2023 due to a run triggered by the FTX crash. Signature announced that it would cut its crypto deposits from $23 billion to $10 billion and completely withdraw from the stablecoin business. Metropolitan Commercial, another bank serving crypto customers, also announced in January 2023 that it would close its crypto business.

Bank regulation changes trend under Trump

In 2025, as Trump returns to the White House, the U.S. crypto-regulatory environment has changed significantly. On March 7, the White House's first cryptocurrency summit was held, and the US Currency Complaint OCC issued a series of explanatory documents allowing national banks to provide services such as cryptocurrency custody, stablecoin reserves and blockchain node participation without special approval. The restrictive guidance required by the Biden administration to consult the regulators in advance and repeal the 2021 Interpretation Letter No. 1179.

"Digital assets should and must be part of the U.S. economy," said Hood, acting auditor of the OCC. The new policy allows banks to securely store private keys, hold stablecoin reserves pegged to the US dollar, and serve as nodes to verify blockchain transactions, providing flexibility for banks to deeply integrate into the digital asset field.

The OCC’s turn may be closely related to Trump’s commitments. "Some people are deeply hurt, and what they do is absurd...it will end soon," Trump said at this year's White House cryptocurrency summit. He criticized Operation Suffocation Point 2.0 for "forcing banks to close crypto accounts and weaponize the government against the entire industry."

On April 17, Powell further clarified the direction of regulatory relaxation in his speech at the Chicago Economic Club, believing that the current cryptocurrency regulatory policy for banking institutions "has room for relaxation." He acknowledged the mainstreaming trend of cryptocurrencies in recent years, pointing out that regulators have been cautious due to "successive bursts and fraud incidents", but the current market has undergone essential changes. It is necessary to establish a clear regulatory framework for stablecoins and send out signals to support innovation.

Today, the Federal Reserve officially revoked relevant guidelines for Suffocation Point Action 2.0. Banks do not need to report for crypto business, and related activities are monitored through conventional regulatory procedures. Consistent with the Trump administration’s commitment to abolish the “exclusion of crypto-enterprise banking services” policy, House Oversight Committee investigations and FDIC disclosed documents have also promoted policy transparency.

What is the next regulatory benefit for the crypto market?

Since 2025, there have been continuous positive news in the crypto market. After the SEC confirmed the application of a number of counterfeit ETFs, the return of traditional crypto market makers, the abolition of DeFi broker rules, the revocation of a series of crypto litigation bills, and Trump personally appointed the new SEC president, it has also welcomed good news from the banking regulatory level. The Federal Reserve announced the withdrawal of the suffocation point action 2.0, which represents the end of the three-year high-pressure regulatory era for banks and crypto markets.

The most direct manifestation of the positive is that the threshold for banking services for the crypto industry has been greatly reduced and legal risks have been greatly reduced. More banks may provide account, payment and custody services for crypto companies. In addition, the fiat currency channels of stablecoin issuers and exchanges will be smoother as a result.

More importantly, the Trump administration has made crypto-friendly policies a priority, and Powell’s affirmation of the stablecoin regulatory framework has injected clear expectations into the market. These intensive positive signals may further attract more traditional financial institutions to the market, push up market liquidity and boost investor confidence.