The 4 Stages of the Game Plan to Take Down Crypto

The big reset is underway

With the recent collapse of Silvergate and Silicon Valley Bank, the market is in a tough spot.

Many are scared thinking we’re heading into a recession or a financial crisis similar to ‘08.

But it might all be a calculated move to get crypto out of the way and give more control to the U.S. government over our assets.

Putting our tin foil hats on (or not), here’s what that crackdown looks like.

#1 — Operation Choke Point 2.0

Why 2.0?

Because the first one was launched in 2013. It targeted banks and other financial institutions that worked with high-risk industries such as payday lending, gun sales, and pornography.

10 years ago, the U.S. Department of Justice (DOJ) pressured banks to cut ties with companies in these sectors and choke off their flow of money to make it harder for them to operate.

The program was discontinued in 2017 arguing that it was hurting legitimate businesses and not effectively reducing fraud and illegal activities.

That brings us to operation choke point 2.0.

Instead of banks, the focus is now on cryptocurrencies.

The co-founder of blockchain data aggregator Coinmetrics and venture capitalist, Nic Carter, outlined this new operation. The U.S. is now trying to suffocate the crypto industry by discouraging traditional financial institutions from working with them.

FTX’s collapse gave the U.S. government the silver bullet to crack down on crypto. All hell is breaking loose since then:

- Senators Elizabeth Warren, John Kennedy, and Roger Marshall started harassing the crypto-friendly bank Silvergate for providing services to FTX and Alameda research. This leads to DOJ’s fraud unit investigating them. Silvergate collapses.

- The FED, the FDIC, and the OCC strongly then strongly discourage banks to engage with crypto.

- Metropolitan Commercial Bank shuts down its crypto-related service.

- Another crypto-friendly bank, Silicon Valley Bank, collapses and might create a domino effect on the tech industry and crypto.

Some say that this operation will allow J.P. Morgan, Blackrock, and others to take over the crypto industry in the U.S. and gain control over a space that’s been threatening their business.

Who knows? It’s a complex situation where there are more questions than answers at the moment.

#2 — Ruin crypto-related businesses and deny them a bail-out

Here’s how this would work out.

Regional banks play an important role in providing credit and liquidity to small and medium-sized businesses, which are often the backbone of local economies.

If regional banks were to experience financial difficulties, this could lead to a contraction in credit availability, which could in turn impact the growth and sustainability of businesses that rely on bank loans.

With cryptocurrencies, this could limit the ability of crypto businesses to secure funding from regional banks, which could slow down the growth of the industry.

Then you have venture capital firms that provide financing and expertise to startups and emerging businesses. Many VCs have been active in the crypto space, investing in new projects and helping to grow the industry.

Any choking over VCs could limit funding for new crypto projects. Without access to capital, crypto business would slow down their rate of innovation and expansion.

Stablecoins have become increasingly popular in the cryptocurrency market, as they offer a way to reduce the volatility that is often associated with other cryptocurrencies. But if stablecoins were to experience a sudden loss of confidence, like a depeg, this could lead to a sell-off that could impact the broader crypto market.

Without their stability, investors might massively flee from so much risk.

Unlike traditional banks and financial institutions, many crypto businesses do not have access to government bailouts in times of financial stress.

If these businesses experienced financial difficulties, they may be more vulnerable to bankruptcy or closure. This could lead to a loss of confidence in the industry as a whole.

#3 — Publicly criticize crypto businesses and use them as examples of high-risk investment

Make them see the rotten apples and they’ll turn away.

By highlighting instances where individuals have lost money or where businesses have engaged in fraudulent or unethical practices, regulators could discourage retail investors from participating in the market.

This could include regulatory actions such as fines or sanctions against businesses that engage in risky or illegal activities, or public statements from government officials warning against the dangers of investing in cryptocurrencies.

The US government could use the falls of all these businesses like 3AC, Voyager, Celsius, and FTX, to shape public opinion against cryptocurrencies. This could lead to increased regulatory scrutiny of the industry, including increased reporting requirements and more rigorous oversight of crypto businesses.

Another way to crack down on crypto is through taxation. Cryptos are currently treated as property for tax purposes, which means that gains from these investments are subject to capital gains taxes.

However, there have been discussions among lawmakers about increasing tax reporting requirements for crypto transactions and even imposing additional taxes on crypto investments.

Here’s what Biden’s budget proposition for next year looks like for crypto:

• Eliminate investors’ ability to take advantage of losses to lower their tax bills.
• Raising the top tax rate to 39.6% for those making $1 million or more in salary, capital gains, and dividends.
• Add a tax on crypto-mining electricity usage (that would reach 30% in the long run).

See where it’s going?

#4 — Introduce CBDCs as the risk-free alternative

Why bother with a highly risky asset like crypto when you have a government-backed one?

Introducing Central Bank Digital Currencies (CBDCs) would provide the U.S. government with more control over the financial system, as it would enable them to track and monitor transactions more closely.

People will think that CBDCs are more stable and reliable investments compared to cryptos since they’re backed by the mighty U.S. government.

If you believe in your government and its anti-crypto message, then you’re more likely to be discouraged to invest in crypto once CBDCs are introduced.

Plus the government could potentially use CBDCs to track transactions and monitor the activities of crypto businesses more closely, which could make it more difficult for these businesses to engage in illicit activities or engage in risky investments.

The takeaway

The crypto industry is facing increasing regulatory scrutiny and potential threats to its growth and sustainability.

We’ll have to see where this leads, but it doesn’t look very bright from where we’re standing right now.

The space has been hammered from all the bad apples of last year and part of getting out of this mess will be to address concerns about fraud and illegal activities.

Clearing that negative side while promoting the benefits of a decentralized and secure financial system will help get the industry back on its feet.

Only time will tell.

Note: this should not be considered financial advice. Always do your research before making a financial decision.

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