The Federal Deposit Insurance Corp. told banks to pause crypto-related activity in 2022 and 2023 but did not expressly order them to stop providing banking services to crypto firms, documents released Friday show.
Previously redacted letters, along with two newly released letters, do not appear to support claims from the crypto industry that the FDIC ordered financial institutions to “de-bank” crypto firms. They do, however, show that the regulator discouraged banks from offering services on public blockchain networks, and requested at least one bank refrain from implementing a new crypto-related product while the FDIC “consider[s] this crypto asset-related activity.”
Twenty-three of the letters, addressed to several banks by the FDIC, were originally released last month as part of the court case between Coinbase consultant History Associates and the regulator. History Associates sued the FDIC and the Securities and Exchange Commission in June to gain access to documents related to the regulators’ probe into Coinbase.
Names of banks, crypto products and blockchains remain redacted.
An FDIC spokesperson declined to comment on the newly released letters.
Coinbase’s legal chief took to social media platform X Friday, saying that the letters “show a coordinated effort to stop a wide variety of crypto activity — everything from basic BTC transactions to more complex offerings.”
Regarding the two new, so-called pause letters, Coinbase CLO Paul Grewal said it’s “hard to believe in their good faith when their sweater further unravels every time we pull on the thread.”
He called on the incoming Congress to launch hearings on the matter.
Grewal and others have long opined that the Biden administration has engaged in a coordinated effort, dubbed Operation Choke Point 2.0, to halt crypto’s adoption by traditional financial companies.
The alleged effort gets its name from Operation Choke Point, an Obama-era effort that “choked off” high-risk industries like payday lending, gambling and firearms from banking access.
Alongside the unredacted letters, the FDIC on Friday published an internal memo from 2022 directing staffers on receiving, reviewing and responding to notifications from banks engaged in, or considering engaging in, crypto-related activities.
“The FDIC is aware of a number of institutions already engaging in crypto-related activities through previous contacts, press reports, and examination activities, but issued the [Financial Institutions Letter] to help close a gap in data regarding this information,” the memo said.
“[C]rypto-related activities may pose significant safety and soundness and consumer protection risks, as well as financial stability concerns,” the memo said. “Moreover, these risks and concerns are evolving as crypto-related activities are not yet fully understood.
