What do Silvergate, Silicon Valley Bank and Signature Bank have in common?
They’re all crypto-focused banks being targeted by financial regulators in their latest attempt at “Operation Choke Point,” the dystopian campaign to pressure banks into closing accounts of legal businesses that run afoul of the ideological goals of the White House.
The financial press has spilled plenty of ink over the past month to set the narrative around the “collapse” of these banks. Silvergate faced a liquidity crisis due to “rapidly rising bond rates”; Silicon Valley Bank was subject to a bank run sparked by “greedy tech raider” Peter Thiel; and Signature Bank … well, don’t worry about it — it just needed to be shut down while everyone was distracted by the other two banks!
But none of these narratives hold water given that this liquidity crisis is hitting nearly every bank in America. With the re-opening of the discount window and introducing the new Bank Term Funding Program, Silvergate and SVB could easily have weathered their liquidity crunch instead of being forced into closure and auction. Why these properties are being auctioned instead of receiving the relief all other banking institutions are now getting is a question for the ages.
Or, more specifically, it may be a question for newly re-appointed FDIC Chair Marty Gruenberg, who spearheaded the original Operation Choke Point and seems to have been called back to finish the job. This time, the surging cryptocurrency market is in the crosshairs. The barrage of recent anti-crypto sentiment is no coincidence, such as President Biden’s “Economic Report,” which disparages crypto a staggering 255 times. Thankfully, the White House is meeting some serious opposition to their crusade against crypto, as evidenced by Minnesota Republican Rep. Tom Emmer’s incisive letter to Gruenberg last month.
Yet, the greatest resource in understanding the Choke Point 2.0 agenda is Silvergate Bank’s official auction documents. Reuters reported that a requirement for any purchaser would be to abandon any crypto business activities formerly provided by the bank. Amazingly, this report was swiftly contradicted by an official FDIC comment claiming that crypto restrictions were not part of the deal, only for the world to learn days later that the new owner of Signature Bank (New York Community Bancorp) would, indeed, be dropping all of Signature’s existing $4 billion crypto ventures.
They say where there’s smoke, there’s fire. But in this case, there was already plenty of smoke, fire and a mountain of public evidence showing an apparent authoritarian attack on legal crypto businesses providing customers with a much-desired service. Perhaps nothing makes the truth clearer than former Congressman Barney Frank opining that the shutdown of Signature Bank (for whom he provided Board oversight) was clearly motivated by anti-crypto animus.
Many legal crypto companies have lost critical services (or folded altogether) in response to the White House’s regulatory tightening. OKcoin has lost its U.S. funding rails, Kraken has suspendedits ACH deposits/withdrawals (but still has other U.S. funding options), and Bittrex has pulled out of the United States altogether. To add insult to injury, crypto juggernaut Coinbase — which has been in active compliance dialogue with the SEC for years — was just served a Wells notice.
Amazingly, Bitcoin leaped to a 40 percent gain within days of the banking decision (with the broader cryptocurrency market following closely behind) and has held on to these gains a full month later. This is perhaps the strongest proof that the promise of Bitcoin — a decentralized currency outside of the control of governments and big banks — is finally strong enough to stand up to the rigged insiders who have long overstayed their welcome. Bitcoin is now “too big to fail” (in terms of the belief of its millions of adherents) and has finally “called the bluff” of overzealous regulators, responding to massive attacks with even more massive spikes in the price for the anti-fragile asset class.
The harder governments try to tame crypto, the more they prove why it is so necessary in a world fully captured by a few legacy financial interests. It is more fitting than ever to reflect on the message encoded in the first Bitcoin block on January 3, 2009, a headline from The London Times: “Chancellor on brink of second bailout for banks — billions may be needed as lending squeeze tightens.”
It seems that the whole world is awake to this never-ending magical thinking masquerading as sound financial policy, and Bitcoin is leading the pack by loudly proclaiming the emperor indeed isn’t wearing any clothes.