Challenges Faced by Crypto Hedge Funds in Banking Services
- Around 120 hedge funds engaged in crypto reported hurdles in accessing banking services over the past three years.
- According to a report by The Wall Street Journal on Dec. 20, approximately 75% of 160 hedge funds surveyed by the Alternative Investment Management Association (AIMA) faced banking issues.
- None of the 20 alternative investors in other asset classes reported similar challenges.
- Banking issues ranged from unclear communication to outright termination of relationships.
- Over half of the affected crypto hedge funds were explicitly informed by banks that their relationships would be terminated, often with vague or non-existent reasons provided.
Insights on Operation Chokepoint 2.0
- The crypto industry speculates about the existence of an effort by the Joe Biden administration known as “Operation Chokepoint 2.0,” which aims to limit access to banking services for the crypto industry in the US.
- Coinbase chief legal officer Paul Grewal released letters from the Federal Deposit Insurance Corporation (FDIC) to banks throughout 2022, urging them to pause or stop crypto-related activities.
- Documents obtained through a Freedom of Information Act (FOIA) request indicated a 15% deposit cap imposed on crypto-friendly banks, providing evidence of Operation Chokepoint 2.0.
- Custodia Bank CEO Caitlin Long and WSPN CEO Austin Campbell also supported the notion of a coordinated effort to hinder the crypto industry in the US.
References:
The Wall Street Journal: Majority of Crypto Hedge Funds Report Facing Banking Issues
Paul Grewal’s Twitter: Austin Campbell’s Tweet
