FDIC Pressured Banks to Halt Crypto Activities, Coinbase Reveals

Documents obtained by Coinbase indicate that in March 2022, the FDIC urged financial institutions to temporarily halt activities related to crypto assets. This was reported by CoinDesk.

In June, the largest American digital currency exchange filed a lawsuit against the SEC and FDIC over their attempts to “cut off” the crypto industry from the banking sector.

The company accused regulators of failing to comply with the Freedom of Information Act (FOIA). Such requests allow the public to demand documents from any federal agency.

Coinbase is represented by the consulting firm History Associates. 

As part of the case, so-called “pause letters” were requested. One such document from March 2022 states:

“At this time, the FDIC has not yet determined what regulatory requirements may be necessary for banks participating in such operations. Therefore, we strongly recommend suspending all activities related to crypto assets.”

Dubbed “Operation Choke Point 2.0” within the industry, Coinbase’s chief legal officer Paul Grewal described the initiative as a reality, not a fabrication.

Re: the letters that show Operation Chokepoint 2.0 wasn’t just some crypto conspiracy theory. @FDICgov is still hiding behind way overbroad redactions. And they still haven’t produced more than a fraction of them. But we finally got the pause letters: https://t.co/Me41BXpbdF…

— paulgrewal.eth (@iampaulgrewal) December 6, 2024

The FDIC sent similar letters from March 2022 to May 2023. In these, the agency also requested banks to provide documents related to cryptocurrencies, including cost-benefit analyses, marketing materials, and disclosures.

Background

The term “Operation Chokepoint 2.0” refers to a 2013 US Department of Justice initiative aimed at restricting banking services for “high-risk” industries, including payday lenders and firearms dealers. According to representatives of the crypto industry, similar methods are currently being used against digital assets.

Congressman French Hill expressed concern about the debanking of crypto companies during hearings this week. In his view, law-abiding American businesses should not face pressure from the government restricting access to financial services.

Next Steps

Coinbase intends to seek access to fully unredacted versions of the letters. Company representatives claim that much of the received documents are heavily redacted, making it difficult to understand their essence.

“It’s hard to shake the impression that you’re reading a secret CIA plan,” noted one source. “However, these documents are merely letters from a financial regulator to banks. And even the parts that aren’t hidden are quite revealing.”

In March, the Crypto Council for Innovation, venture firm Paradigm, the US Chamber of Commerce, and several other organizations supported Coinbase in its call for the SEC to develop clear rules for the digital asset industry.