At first blush, one might not expect the digital currency and firearm industries to have much in common – when was the last time you heard someone utter Bitcoin and guns in the same breath? Recently, however, the two industries’ interests have aligned, and the pro-Second Amendment lobby’s efforts might yield unexpected benefits for digital currency companies seeking access to banks.
Beginning in 2013, the Department of Justice (“DOJ”) initiated “Operation Choke Point,” a large-scale investigation of banks and payment processors, with the ostensible goal of combatting mass-market consumer fraud. In practice, however, the DOJ, in conjunction with bank examiners, has targeted certain categories of merchants deemed as “high-risk” by the Federal Deposit Insurance Corporation (“FDIC”). Through burdensome subpoenas, the threat of crippling lawsuits, and settlement negotiations, the DOJ has pressured banks to stop doing business with “high-risk” merchants, and thereby “choked” out such merchants’ access to credit and payment processing services. Among the merchants that have been cut off from their banks are those in the firearm/ammunition and digital currency-related businesses. As Sarah Martin, Vice President at the Digital Currency Council, has explained: “Though unlikely bedfellows, the digital currency and firearm industries find themselves equally estranged from the formal financial system because of programs like ‘Operation Choke Point.’ Regardless of the differences in their products or services, all now share the common pain of trying to run a business without a bank account.”
In March 2015, Rep. David Schweikert introduced a bill “to terminate Operation Choke Point,” which if enacted may go a long way toward easing the common pain that the digital currency and firearm industries have experienced. The bill is motivated by concerns related to the Second Amendment: it explicitly asserts that the DOJ and FDIC “can no longer be trusted to carry out Operation Choke Point without targeting the Second Amendment and firearm dealers and manufacturers.” If enacted, however, the bill will have ramifications that extend far beyond the firearms industry – it will dictate that “[n]o amounts appropriated or otherwise made available under any provision of law . . . nor any amounts derived from any fee or other source, may be used by . . . any . . . Federal agency to carry out Operation Choke Point.” The bill also will cut funding for “any other program designed to discourage the provision or continuation of credit or the processing of payments by financial institutions for dealers and manufacturers of firearms and ammunition.” In late April, the bill was referred to the Subcommittee on Crime, Terrorism, Homeland Security, and Investigations. Digital currency companies seeking access to credit and payment processing services will be keeping their fingers crossed that the bill gains traction and ultimately becomes law.