- FDIC urged banks to halt crypto services, citing regulatory uncertainty, as revealed by Coinbase’s FOIA request.
- Industry leaders claim FDIC’s pause letters were covert efforts to limit crypto access to banking services.
- Calls grow for transparency after FDIC’s redacted documents hint at regulatory overreach in crypto-banking activities.
Coinbase Chief Legal Officer Paul Grewal has disclosed that the FDIC sent banks pause letters in 2022. These letters urged banks to suspend or avoid engaging in cryptocurrency-related activities. The documents, obtained through a Freedom of Information Act (FOIA) request, revealed the FDIC’s concerns about regulatory clarity and crypto services.
Letters Highlight Regulatory Concerns
The letters, starting in March 2022, emphasized the FDIC’s uncertainty regarding banks offering crypto services. One excerpt stated the FDIC had not determined necessary regulatory filings for such activities. Many parts of the documents were redacted, potentially to protect proprietary information or products.
The FDIC also questioned the legal analysis conducted by banks under Part 362 of its Rules and Regulations. This rule governs insured state banks, indicating some were exploring crypto-related services. The agency stressed that banks must ensure operations remain safe and sound.
Allegations of Operation Chokepoint 2.0
Grewal labeled the letters as evidence of Operation Chokepoint 2.0, alleging government-led efforts to stifle crypto. He criticized the FDIC for withholding critical details and releasing only a small portion of relevant documents. Grewal urged the next administration to reverse politically motivated regulatory decisions impacting the crypto industry.
Other industry leaders also expressed concerns. Caitlin Long, CEO of Custodia Bank, claimed the pause letters were indefinite and served as covert “cease and desist” directives. She argued these actions targeted lawful crypto businesses unfairly.
Long also noted that the Federal Reserve was involved, with its name appearing in many letters. This coordination further suggested a broader effort to limit banks’ participation in cryptocurrency.
Impact on Banks and Crypto Services
The pause letters reportedly spanned nearly two years, affecting the industry’s ability to access essential banking services. Regulators cited customer protection and financial crime prevention as reasons for their actions. However, critics argued that the measures hindered innovation and growth within the U.S. crypto sector.
Grewal applauded Coinbase’s efforts in obtaining the FOIA documents. He emphasized the need for clarity and fair regulation to support legitimate businesses. As the crypto industry continues to evolve, stakeholders demand balanced oversight to foster growth and stability.
