Coinbase Reveals Over 20 FDIC’s Letters Urging Banks to Avoid Crypto

Highlights:

• Coinbase found over 20 instances where the FDIC advised banks to pause crypto activities. 
• Grewal criticized FDIC’s letters as attempts to restrict financial access for U.S. companies. 
• In June, Coinbase filed lawsuits against the SEC for ignoring earlier public disclosure requests.

Coinbase’s Chief Legal Officer (CLO), Paul Grewal, claimed in a Nov. 1 X post that the company found over 20 documented cases where the Federal Deposit Insurance Corporation (FDIC), the US agency insuring bank deposits, advised banks to pause or avoid crypto-related activities. This revelation highlights rising regulatory pressure and potential changes in how banks interact with the growing digital asset market.

Grewal noted that Coinbase obtained this information after suing the FDIC to comply with its Freedom of Information Act (FOIA) request. In its request, Coinbase asked for details on the FDIC’s “pause letters” sent to banks under Operation Choke Point 2.0. Grewal called these letters a troubling attempt to prevent legitimate U.S. companies from accessing financial services.

Coinbase’s Response to FDIC’s Crypto Regulation Efforts and Call for Transparency

Grewal commented on the letters submitted by the FDIC in the November 1 court filing. He described the contents as “a shameful example of a government agency attempting to restrict financial access for law-abiding American companies.” The court filing outlines 23 documents that detail instances where the FDIC questioned banks’ risk assessments related to crypto services. It advised the banks to refrain from offering these services until a review is completed.

For example, on March 11, 2022, Assistant Regional Director Eric T. Guyot advised a bank to “pause all crypto asset-related activity” to allow the FDIC time to evaluate the safety of the proposed crypto product.

Similarly, on March 25, 2022, Jessica A. Kaemingk, an acting FDIC Regional Director, advised another bank’s board to reconsider its proposed crypto-asset product. She raised concerns about the program’s “safety and soundness” and requested more documents to ensure compliance.

On April 22, 2022, the FDIC asked a third lender to suspend an active digital assets service. The agency stated that this pause was necessary to clarify the service’s compliance and risk management before permitting its expansion.

Grewal ended his post on X by affirming that Coinbase will keep advocating for clarity on crypto investment regulations. Grewal expressed concern about the lack of transparency. He noted that the FDIC frequently works behind a “bureaucratic curtain” instead of participating in open discussions.

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

FOIA Requests and Legal Actions Against Regulators

Last month, Coinbase filed two Freedom of Information Act requests to U.S. regulators. These requests seek information about the ongoing crackdown on cryptocurrency by U.S. banks. Grewal mentioned that the first request was for documents concerning the digital asset deposit cap that the FDIC and other banking regulators have placed on financial institutions. The company submitted a second FOIA request to determine how regulators responded to prior crypto-related FOIAs.

We filed two new sets of FOIA requests in our continued effort to get any sort of clarity on how regulatory agencies are approaching digital assets. In short, so long as the government will not relent, neither will @coinbase. 1/3

— paulgrewal.eth (@iampaulgrewal) October 21, 2024

In June, Coinbase filed lawsuits against the U.S. Securities and Exchange Commission (SEC) and the FDIC for reportedly failing to comply with earlier requests for public disclosures. In 2023, Coinbase requested that the SEC release documents related to the agency’s classification of Ether (ETH). That same year, the SEC charged Coinbase for allegedly violating securities laws with its ETH staking-as-a-service offering.