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27th March 2023 - Operation Choke Point 2.0.


Operation Choke Point 2.0 is affecting the US crypto business, in favour of the EU.

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Market Wrap

Janet Yellen, US Secretary of the Treasury, was asked last week in a congressional hearing whether she is a Keynesian or not. As she is a trained economist, I was rather surprised by her answer:

“I don’t know what you mean by Keynesian”.

In the context of a US debt to GDP ratio of 109%, that is a worrying admission, opening the doors for a further bout of QE (quantitative easing).

Curious Cryptos’ Commentary – Liquidity issues

Operation Choke Point 2.0 appears to be having an impact on the liquidity seen on CEX (centralised crypto-currency exchanges).

According to an analysis by Conor Ryder ( one measure of liquidity has taken a large hit:

The drop-off in early March coincides with the closure of the SEC (Silvergate Exchange Network) operated by Silvergate Bank which allowed institutions to move fiat onto CEX. When SVB (Silicon Valley Bank) and Silvergate collapsed two key on-ramps for fiat into cryptos for retail investors disappeared, the timing of which is circled above.

Another graph shows that liquidity vs USD is worsening relative to liquidity against USDT (Tether):

Liquidity is a real issue as it has an immediate impact on volatility, and slippage, both of which affect the cost of trading. There is no doubt that any asset is less desirable from an investor’s point of view if the cost of getting in and getting out again is higher than it could otherwise be.

Operation Choke Point 1.0 was an initiative by the United States Department of Justice and ran for four years from 2013. Its purpose was to make the provision of banking services to certain businesses (firearms dealers, payday lenders, and others) more difficult. Officials were enforcing their own moral judgements about legal business, a scary place to find oneself in.

Initially denied by the authorities following a story in the Wall Street Journal, it was an illegal operation that resulted in cash payments to settle multiple lawsuits.

That is the likely outcome of Operation Choke Point 2.0 but meanwhile the process of on-ramping fiat in the US will remain more difficult than before.

This is a boon to the crypto industry in Europe. With a settled regulatory system (almost) in place in the form of MiCA (Markets in Capital Assets), the EU is looking forward to a windfall of crypto tax dollars.

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