Incoming crypto czar Sacks says 'Choke Point' crackdown 'needs to be looked at'

Chris Lane, former chief technology officer of Silvergate Bank, has given a "personal view" of the bank's collapse on X, blaming regulators for "pull[ing] a bait and switch" on the bank once favored by many in the crypto industry. 

Silvergate Bank voluntarily wound down and liquidated itself in March 2023 , as part of the regional bank crisis that struck the United States, leading to the closure of three mid-sized banks—Silvergate, Silicon Valley Bank, and Signature Bank—over just five days. "In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward," the firm said in a Securities and Exchange Commission  filing at the time. 

However, since the bank's closure, multiple executives have explicitly blamed regulators for a sudden shift that ultimately prevented Silvergate Bank from continuing its digital asset-focused business model. Lane, who is also the son of former Silvergate CEO Alan Lane, is the latest to do so, penning a thread on X describing his "personal view" of the events leading up to the bank's collapse. 

"Silvergate became what it was serving cryptocurrency clients," wrote Lane. "[Crypto was a] strategic vertical we started focusing on in 2013. Regulators came in sometime in Spring 2023 and severely limited the amount of US dollar deposits we could hold for digital asset clients. There went our entire business model." 

Several influential figures in Washington pointed fingers at volatility in the crypto industry, especially in the wake of FTX's collapse, for helping spark Silvergate's collapse. Silvergate had provided some banking services to the exchange, which filed for bankruptcy in November, 2022. 

"As the bank of choice for crypto, Silvergate Bank's failure is disappointing, but predictable," wrote U.S. Senator Elizabeth Warren on X at the time of Silvergate's collapse. "I warned of Silvergate's risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk."

Yet Lane in his thread defended Silvergate's solvency in the wake of FTX collapse. "Our business was not perfect," Lane wrote . "We did provide banking services to FTX, as many other banks did. But Silvergate was Solvent, Liquid, (and I believe) was shot in the back by our regulators." 

Some figures in the crypto sphere have alleged that coordinated actions by regulators to limit the digital assets industry's access to U.S. banks can be thought of as "Operation Choke Point 2.0," an evolution of a 2013 Department of Justice initiative to investigate banks that serviced certain risky or questionable financial ventures, such as payday loan companies. 

According to heavily redacted letters obtained in a lawsuit brought by Coinbase, the Federal Deposit Insurance Corporation did ask some financial institutions to pause their crypto-related activities, The Block recently reported . "The letters... show that Operation Chokepoint 2.0 wasn't just some crypto conspiracy theory," Coinbase Chief Legal Officer Paul Grewal said in a post  on X.

In response to Lane's thread, David Sacks, the Trump administration's incoming A.I. and Crypto Czar, stated , "There are too many stories of people being hurt by Operation Choke Point 2.0" and said the alleged initiative "needs to be looked at."