What does the end of "Suffocation Point Action 2.0" and the loosening of banks mean for the crypto market?

On April 25, The Federal Reserve (FED) announced a major decision: to revoke the regulatory guidance issued in 2022 regarding banks' encryption assets and dollar token business, abolish the 2023 related "no-objection" procedure, and withdraw from the previously issued policy statement on the risks of encryption asset business in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).

Stifling Action 2.0 on the Marginalized Crypto Industry

"Choke Point 2.0" is a term used in the cryptocurrency industry to refer to a series of banking regulatory policies from the Biden administration. This naming originates from the "Choke Point" during the Obama era, which refers to achieving regulatory goals by pressuring banks to cut off financial services to specific industries.

In the encryption market, the Stifling Point Action 2.0 generally refers to the period between 2022 and 2023, when major U.S. financial regulatory agencies—the Federal Reserve (FED), FDIC, and OCC—strongly discouraged banks from engaging in activities related to crypto assets through a series of guidelines and policy statements, indirectly limiting the connection between crypto enterprises and the traditional banking system.

It all started in 2022 when The Federal Reserve (FED) issued a regulatory letter requiring state member banks to provide prior notice before engaging in encryption asset businesses. While this seems like a procedural requirement, it actually significantly raised the threshold for banks to enter the encryption field.

By early 2023, regulatory efforts had further escalated. The Federal Reserve (FED), FDIC, and OCC jointly issued a statement clearly stating that issuing or holding encryption assets on public, decentralized networks "is highly likely to be inconsistent with safe and sound banking practices." In the same year, regulators also required banks to obtain prior "no objection" approval from regulators when engaging in USD token (i.e., stablecoin) business. This procedure is not only complex and time-consuming but also provides regulators with veto power.

As a result, many have referred to this wave of regulatory pressure as "Suffocation Point Action 2.0." Nic Carter, the former first cryptocurrency asset analyst at Fidelity Investments, described this series of actions in a deep analysis as "a precise and extensive crackdown on the cryptocurrency industry through the banking system."

He pointed out that the goal of regulators is to cut off the connection between cryptocurrency companies and the fiat currency system by making it more difficult for banks to serve the encryption industry. This not only restricts the account opening and payment channels for cryptocurrency companies but also causes serious impacts on the fiat in-and-out channels for stablecoin issuers and exchanges. Some cryptocurrency companies even face the risk of "completely losing banking services," and the liquidity of stablecoins and the operation of exchanges are thus threatened.

FTX collapse: The fuse of regulatory pressure

The choke point action 2.0 is inextricably linked to the collapse of the FTX exchange in November 2022. The FTX collapse resulted in clients losing billions of dollars, and market confidence plummeted. The cryptocurrency credit crisis of 2022 did not have a significant impact on traditional finance, but regulators are clearly taking preemptive measures to be proactive against potential risks. Thus, the regulatory system is preventing risks from spilling over into the banking system by limiting banks' exposure to the cryptocurrency industry.

For crypto-friendly banks, it naturally becomes a key target for regulation. SilverGate.io and Signature were among the few banks willing to provide services for crypto clients at that time, therefore facing immense pressure. In December 2022, Senators Elizabeth Warren, John Kennedy, and Roger Marshall jointly sent a letter to SilverGate.io criticizing its failure to detect suspicious activities related to FTX and its affiliated company Alameda Research.

SilverGate.io subsequently faced a bank run triggered by the collapse of FTX, with its stock price plummeting from a high of $160 in March 2022 to $11.55 in January 2023. Signature announced a reduction of its encryption deposits from $23 billion to $10 billion and completely withdrew from the stablecoin business. Another bank serving crypto clients, Metropolitan Commercial, also announced the closure of its crypto operations in January 2023.

Shift in Banking Regulation Under Trump

In 2025, with Trump returning to the White House, the regulatory environment for encryption in the United States underwent significant changes. On March 7, the White House held its first cryptocurrency summit, during which the OCC released a series of interpretive documents allowing national banks to offer services such as encryption custody, stablecoin reserves, and participation in blockchain nodes without special approval. This overturned the restrictive guidance from the Biden administration that required banks to consult regulatory agencies in advance, and abolished Interpretive Letter No. 1179 from 2021.

OCC Acting Auditor General Hood stated, "Digital assets should and must become a part of the U.S. economy." The new policy allows banks to securely store private keys for customers, hold reserves of stablecoins pegged to the dollar 1:1, and act as nodes to validate blockchain transactions, providing flexibility for banks to deeply integrate into the digital asset space.

The OCC's shift may be closely related to Trump's commitments. At this year's White House cryptocurrency summit, Trump stated: "Some people are suffering greatly, and what they are doing is absurd... this will all end soon." He criticized the Stifling Point Action 2.0 for "forcing banks to close cryptocurrency business accounts, weaponizing the government against the entire industry."

On April 17, Powell further clarified the direction of regulatory easing in a speech at the Chicago Economic Club, stating that there is "room for relaxation" in the current cryptocurrency regulatory policies for banking institutions. He acknowledged the mainstreaming trend of cryptocurrencies in recent years, pointing out that regulators had taken a cautious stance due to "successive incidents of collapses and fraud," but that the market has fundamentally changed, necessitating the establishment of a clear regulatory framework for stablecoins to signal support for innovation.

Today, the Federal Reserve officially revoked the guidelines related to the Strangulation Point Action 2.0, and banks are no longer required to report their encryption business; related activities are monitored through regular regulatory procedures. In line with the commitment to abolish the "exclusion of encryption enterprises from banking services" policy made by the Trump administration, investigations by the House Oversight Committee and documents disclosed by the FDIC have also promoted policy transparency.

Is the next regulatory good news for the encryption market?

Since 2025, the cryptocurrency market has been flooded with positive news. Following the SEC's confirmation of a number of altcoin ETF applications, the return of traditional crypto market makers, the abolition of DeFi broker rules, the dismissal of a series of cryptocurrency litigation bills, and Trump's personal appointment of a new pro-crypto SEC chairman, we have also welcomed good news from the banking regulatory side. The Federal Reserve announced the withdrawal of the Stifling Point Action 2.0, marking the end of a three-year high-pressure regulatory era for the relationship between banks and the cryptocurrency market.

The most direct manifestation of the positive news is that the threshold for banks to serve the encryption industry has been significantly lowered, and legal risks have greatly decreased. More banks may provide accounts, payment, and custody services for encryption companies. In addition, the fiat channels for stablecoin issuers and exchanges will become smoother as a result.

More importantly, the Trump administration prioritized encryption-friendly policies, and Powell's affirmation of the regulatory framework for stablecoins injected clear expectations into the market. These intense positive signals may further attract more traditional financial institutions into the market, boosting market liquidity and enhancing investor confidence.