Coinbase FOIA Reveals FDIC’s Efforts to Restrict Crypto Banking  

• FDIC sent pause letters to banks in 2022, urging them to halt crypto services over regulatory concerns.  
• Critics label the letters as efforts to limit crypto’s access to essential banking services, hindering industry growth.  
• Transparency demands rise as redacted documents hint at coordination between FDIC and Federal Reserve in regulating crypto activities.  

The Federal Deposit Insurance Corporation (FDIC) urged banks in 2022 to pause cryptocurrency-related services. This development came to light through documents obtained by Coinbase via a Freedom of Information Act (FOIA) request. The letters highlighted regulatory uncertainty surrounding crypto services, igniting concerns about overreach by regulatory authorities. 

Documents Expose Regulatory Concerns  

The pause letters, issued from March 2022 onward, pointed to unresolved regulatory questions about banks offering crypto services. The FDIC reportedly had not clarified the necessary filings for such activities under its rules. While portions of the letters remained redacted, critics argue the move reflects a broader hesitancy to embrace cryptocurrency within traditional banking.  

Additionally, the FDIC scrutinized banks’ legal analyses under its Part 362 Rules and Regulations. This framework governs insured state banks exploring innovative financial services, including those involving cryptocurrency. The FDIC emphasized the importance of ensuring safe and sound operations.  

Accusations of Crypto Suppression  

Coinbase Chief Legal Officer Paul Grewal criticized the FDIC’s actions, describing them as part of “Operation Chokepoint 2.0,” a purported government-led effort to curb crypto activities. He called the pause letters covert measures to discourage banks from engaging with cryptocurrency-related businesses, alleging that they unfairly targeted legitimate enterprises.  

Caitlin Long, CEO of Custodia Bank, also weighed in, claiming the FDIC’s actions amounted to indefinite “cease” directives. She further noted that many letters mentioned the Federal Reserve, suggesting a coordinated regulatory approach aimed at limiting crypto-banking partnerships.  

Impact on Banking and Crypto Services  

The pause letters reportedly disrupted banks’ ability to provide services to the crypto industry over two years. Regulators cited concerns about customer protection and preventing financial crimes as key reasons for their actions. However, critics argue that these measures stifled innovation and impeded the sector’s growth in the U.S.  

Coinbase lauded its success in obtaining the FOIA documents, underscoring the need for balanced regulatory oversight. Advocates stress that fair and transparent rules are essential to fostering innovation while maintaining financial system stability.