Operation Chokepoint 3.0 appears to be on the horizon; here's a breakdown of the key details...
In a worrying development for the crypto and fintech industry, major US banks, including JPMorgan Chase, are reportedly implementing a strategy dubbed "Chokepoint 3.0" to stifle competition from platforms like Coinbase and Robinhood. This approach involves imposing high fees on transfers and data access, along with restricting access to banking data and services necessary for these platforms to operate effectively.
The high fees imposed by banks such as JPMorgan are causing concern. For instance, it is reported that JPMorgan charges steep fees, such as $10 to transfer $100, making it costly for users to move money into crypto and fintech accounts.
Moreover, banks are limiting access to critical banking data required by fintech apps, undermining their ability to offer competitive products. This effort resembles an evolution from regulatory efforts known as Operation Chokepoint in the Biden era but is now driven by the banks themselves rather than regulators.
Critics, including Andreessen Horowitz partner Alex Rampell, argue that these tactics are not about revenue generation but about eliminating competition and maintaining traditional banking dominance. Rampell coined the term "Chokepoint 3.0" to describe the alleged new wave of financial pressure from within the banking sector. He warned that banks might soon take more aggressive steps, such as blocking users from linking their accounts to crypto or fintech platforms.
The White House’s Digital Assets Working Group encourages collaboration and reduction of barriers but so far faces challenges due to these banking tactics. Despite mounting resistance from traditional banking giants, the crypto industry continues to push forward. Platforms like Coinbase and Robinhood are expanding aggressively, with Coinbase reportedly considering the launch of tokenized stocks and derivatives in the U.S.
Robinhood is also making strides, rolling out over 200 tokenized stocks and ETFs across 31 European countries. The SEC's support and global growth have allowed platforms like Coinbase to remain undeterred despite these challenges.
However, Rampell stated that the high fees charged by banks, including JPMorgan, are not about generating revenue, but about reducing competition. He raised concerns about this in a newsletter on 31 July.
JPMorgan's 30 July announcement of a direct bank-to-wallet link with Coinbase signals a notable shift. Despite the allegations, it remains to be seen how this development will impact the ongoing tension between traditional finance and the crypto industry.
The crypto industry's evolution seems far from over, with the potential for significant disruption and innovation still on the horizon. The challenges posed by "Chokepoint 3.0" serve as a reminder of the industry's need for regulatory clarity and a level playing field.
- The high fees imposed by JPMorgan, such as $10 to transfer $100, are causing concern for users moving money into crypto and fintech accounts.
- Critics argue that tactics like limiting access to banking data and imposing high fees are not about revenue generation but about eliminating competition and maintaining traditional banking dominance.
- Andreessen Horowitz partner Alex Rampell coined the term "Chokepoint 3.0" to describe the alleged new wave of financial pressure from within the banking sector.
- Despite mounting resistance from traditional banking giants like JPMorgan, the crypto industry continues to push forward, with platforms like Coinbase and Robinhood expanding aggressively.
- The challenges posed by "Chokepoint 3.0" serve as a reminder of the industry's need for regulatory clarity and a level playing field to ensure continued innovation and disruption in the crypto and fintech landscape.
