- Court documents revealed the FDIC asked certain banks to “pause” crypto-related activities in 2022 due to uncertain regulations around digital assets.
- The letters were released as part of a FOIA lawsuit filed by Coinbase against the FDIC over allegations of the government attempting to “debank” crypto firms.
- Coinbase’s chief legal officer claimed the letters provided evidence that the alleged government effort to cut ties with crypto companies was not just a “conspiracy theory.”
The United States Federal Deposit Insurance Corporation (FDIC) has reportedly sent several letters to banks in 2022 asking them to halt any “crypto asset-related activity”. This development was revealed as part of a Freedom of Information Act (FOIA) lawsuit backed by cryptocurrency exchange, Coinbase.
FDIC’s Pause Letters to Banks
The court documents of a FOIA lawsuit against the FDIC show that the regulatory body asked certain U.S. financial institutions to put a hold on their cryptocurrency-related banking activities. These so-called “pause letters” were sent to the boards of directors of various U.S. banks, although their specific identities remain undisclosed. The letters, dated 2022, requested these institutions to halt all crypto asset-related activity due to the uncertainty surrounding regulations of digital assets. The FDIC has stated that it will update all FDIC-supervised banks once a determination has been made regarding the supervisory expectations for engaging in crypto-related activities.
The FOIA Lawsuit and Allegations of ‘Debanking’
The court filing is part of a FOIA lawsuit initiated by History Associates in June. Coinbase, which is also involved in an enforcement action filed by the U.S. Securities and Exchange Commission, hired the firm to file a FOIA request to the FDIC. This was done following allegations of debanking crypto firms, i.e., banks cutting ties with companies dealing in digital assets. The request was denied, leading to the ongoing lawsuit.
The Debate: Conspiracy Theory or U.S. Government Policy?
The contents of some of the other letters in the Dec 6 filing suggested that the financial institutions under scrutiny were considering activities related to cryptocurrencies. These letters are being seen as proof of what is being termed as “Operation Chokepoint 2.0”. This term is used within the industry to suggest that the U.S. government is pressuring banks to sever ties with crypto companies. Paul Grewal, Coinbase’s chief legal officer, asserted that these letters substantiate the claim that Operation Chokepoint 2.0 is more than just a crypto conspiracy theory.
Crypto Companies and Banks: A Tense Relationship
In November, several executives from crypto firms voiced their concerns on social media, claiming that they had been contacted by banks and informed that their accounts would be closed due to their connections with digital assets. Brian Armstrong, CEO of Coinbase, mentioned that their FOIA request with the FDIC was still underway and could potentially reveal whether any government officials had violated the law.
Conclusion
The crypto industry is closely observing the FDIC’s actions and how they will impact the relationship between banks and crypto companies. As the situation evolves, it will certainly have a significant impact on the future regulatory landscape for crypto-related banking activities in the U.S.
