In a groundbreaking revelation, confidential letters obtained by Coinbase reveal that the Federal Deposit Insurance Corporation (FDIC) actively discouraged U.S. banks from engaging with cryptocurrency businesses. These documents, released after a protracted court battle, validate concerns of a systematic effort to exclude crypto firms from the financial system.
Revealing the FDIC’s Stance on Crypto
Coinbase’s legal team, assisted by History Associates Inc., fought to unearth internal FDIC communications. The release of 23 heavily redacted letters paints a clear picture: the regulator instructed banks to halt all crypto-related activities, stating:
“We respectfully ask that you pause all crypto asset-related activity.”
The letters indicate that any new crypto services or activities would not proceed until banks satisfied the FDIC’s complex compliance demands—demands that the regulator itself had not fully fleshed out.
A Systematic Plan to “Debank” Crypto
The crypto industry has long complained about being excluded from the U.S. banking system, but these letters provide hard evidence of a deliberate plan to wall off crypto businesses.
Paul Grewal, Coinbase’s Chief Legal Officer, stated:
The letters show that this was no conspiracy theory … There was a concerted plan by the FDIC to deny banking services to a legal American industry.
The Challenges for Crypto Firms
- Regulatory Uncertainty:
The FDIC letters show a lack of clarity about the regulatory framework needed to approve crypto services, stifling innovation and growth. - High Compliance Barriers:
Banks were presented with complex questions and requirements before even considering crypto-related activities. - Impact on Nationally Chartered Crypto Banks:
Anchorage Digital, a federally chartered bank, also testified about being cut off from banking services, highlighting the pervasive nature of the debanking campaign.
Operation Chokepoint 2.0
Dubbed “Operation Chokepoint 2.0,” this effort mirrors a previous government initiative aimed at cutting off controversial industries from financial services. This issue gained renewed attention during a recent Congressional hearing, where crypto business leaders voiced their struggles.
What’s Next for Crypto and the FDIC?
Coinbase plans to push for the removal of redactions in the released letters to uncover the institutions involved, the services they sought to offer, and the specific questions posed by the FDIC.
Grewal emphasized the importance of transparency, urging regulators to stop delaying disclosure:
“Even after federal courts ordered the FDIC to produce this information, they continue to drag their feet. It’s time they stop.”
Conclusion
The FDIC’s actions, now exposed, raise significant questions about the balance between regulation and innovation in the U.S. financial system. As the crypto industry continues to face hurdles, these revelations highlight the urgent need for clear and fair regulatory frameworks to foster growth while ensuring compliance.
