Coinbase’s Chief Legal Officer, Paul Grewal, has publicly criticized the Federal Deposit Insurance Corporation (FDIC), alleging that the agency is actively discouraging banks from engaging with the cryptocurrency sector.
According to Grewal, the FDIC has sent “pause letters” to financial institutions interested in offering crypto-related services, advising them to delay or reconsider their involvement in digital assets. This revelation follows Coinbase’s legal effort to obtain these communications through a Freedom of Information Act (FOIA) request.
FDIC urged banks to hold back on Crypto ventures
Slowly but surely, the picture is becoming clear. After we sued, @FDICgov finally started giving us information related to our FOIA request about the pause letters it sent to financial institutions as part of Operation Chokepoint 2.0. In short, the contents are a shameful example…
— paulgrewal.eth (@iampaulgrewal) November 1, 2024
Grewal stated that the FDIC has shown reluctance toward banks engaging in crypto projects, with several correspondences indicating the agency’s concern over the sector’s “safety and soundness.” In one case, FDIC Assistant Regional Director Eric T. Guyot advised a bank on March 11, 2022, to “pause all crypto asset-related activity” to give the FDIC time to review the safety of the proposed service. Similar guidance was issued by FDIC Acting Regional Director Jessica A. Kaemingk on March 25, 2022, urging another bank’s board to rethink its crypto-related offering. In her communication, Kaemingk also requested additional documentation to confirm the product’s regulatory compliance.
Further instances of regulatory hesitance
The FDIC continued its cautious approach in April 2022 when it asked a third financial institution to put a hold on its digital asset service. The agency cited the need to evaluate the service’s compliance with regulatory standards before permitting further expansion. Coinbase has labeled these actions part of a broader “Operation Choke Point 2.0” strategy, accusing the FDIC of unfairly hindering the development of legitimate crypto-focused banking services in the U.S.
Coinbase pursues clarity on Crypto regulations
Coinbase has prioritized regulatory transparency, with Grewal emphasizing the need for clearer guidelines around digital assets. The FOIA request to the FDIC represents Coinbase’s efforts to bring transparency to the federal government’s stance on crypto regulation.
The exchange is pursuing lawsuits against the Securities and Exchange Commission (SEC), urging the agency to establish explicit rules for crypto. Coinbase argues that regulatory clarity is crucial for the crypto industry’s growth, stating that the FDIC’s opaque approach creates unnecessary obstacles for banks and crypto companies. Coinbase’s ongoing legal battles reflect a larger push within the crypto industry for clear and accessible regulatory frameworks in the U.S.
The post FDIC’s ‘Pause Letters’ Signal Operation Choke Point 2.0 Tactics Against Crypto Banking first appeared on Coinfea.