FDIC asked banks to ‘pause’ crypto activities — Court docs

As a seasoned analyst with over two decades of experience in the financial sector, I have seen my fair share of regulatory actions and policy shifts. The recent court documents revealing that the FDIC asked certain US banks to pause crypto banking activities is not entirely surprising, given the evolving landscape of digital assets and the need for clarity in regulations.

The court filings from a Freedom of Information Act (FOIA) lawsuit disclosed that the U.S. Federal Deposit Insurance Corporation (FDIC) had requested some financial institutions to temporarily halt their cryptocurrency banking operations.

On December 6th, a court in the U.S. District Court for the District of Columbia disclosed “hold letters” that FDIC representatives had sent to various bank boards across the United States. The identities of these banks were concealed through redaction.

In a correspondence dated 2022, the FDIC advised financial institutions to halt any operations related to cryptocurrencies due to the unclear regulatory landscape governing digital assets.

Some letters indicated that the FDIC will inform FDIC-regulated banks about their supervisory expectations regarding cryptocurrency-related activities and any required regulatory paperwork at a future date when a decision has been reached.

In June, History Associates submitted a Freedom of Information Act (FOIA) lawsuit, which included a court filing. This lawsuit was aimed at Coinbase, a cryptocurrency exchange that has its own ongoing enforcement action with the US Securities and Exchange Commission. The purpose of this FOIA request by Coinbase was to ask the Federal Deposit Insurance Corporation (FDIC) for information regarding accusations of debanking crypto companies. However, the FDIC denied this request, resulting in the lawsuit.

Conspiracy theory, or evidence of a US government policy?

In a filing on December 6th, other letters indicated that banks might be required to share necessary information prior to extending new services. Although a large portion of the text was blacked out, certain FDIC letters hinted at financial institutions potentially engaging in crypto-related activities.

In simpler terms, Paul Grewal, the legal head of Coinbase, stated in a December 6 blog post that “[the letters reveal] Operation Chokepoint 2.0 wasn’t just a rumor about cryptocurrencies,” but he believes that the Federal Deposit Insurance Corporation (FDIC) is being secretive by using excessive redactions to hide information.

In common terms, Operation Chokepoint 2.0 refers to an alleged attempt by the U.S. government to influence banks into discontinuing their relationships with cryptocurrency businesses.

The initial Operation Choke Point, which was active from 2013 to 2017, primarily targeted banks in their interactions with payday loan providers and other potentially risky business sectors.

In November, various notable figures from cryptocurrency companies posted on social media, stating that they received communications from banks in the year 2023, informing them that their accounts were to be shut down because of their association with digital currencies.

As an analyst, I’m sharing an update from Coinbase CEO Brian Armstrong: The Freedom of Information Act (FOIA) request we submitted with the Federal Deposit Insurance Corporation (FDIC) is currently underway. This process might potentially unveil details about whether any government officials may have breached the law.

Martin Gruenberg, currently serving as the Chair of the FDIC, is anticipated to step down on January 19th, which is a day prior to the new administration headed by Donald Trump officially taking office. As of now, no candidate has been named by Trump for the role of leading this regulatory body.

2024-12-06 19:59

Conspiracy theory, or evidence of a US government policy?

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