Recent documents from Coinbase reveal that the Federal Deposit Insurance Corporation (FDIC) issued “pause letters” to banks between 2022 and 2023, advising them to halt certain cryptocurrency services until the agency could better assess associated risks.
These letters specifically instructed banks to stop activities like Bitcoin transactions through third-party partnerships and advanced crypto services. Coinbase’s Chief Legal Officer, Paul Grewal, argues that these communications reflect a coordinated effort to limit crypto initiatives, raising concerns about their impact on banks’ willingness to engage with the crypto sector.
The FDIC’s actions have led to increased challenges for U.S. crypto companies in accessing essential banking services, drawing parallels to the controversial “Operation Chokepoint,” which pressured financial institutions to sever ties with specific industries. Industry leaders, including Ripple’s Chief Legal Officer, have criticized the FDIC’s tactics as discouraging banks from supporting crypto businesses.
An internal FDIC memorandum highlighted the need for stricter scrutiny of banks directly involved in cryptocurrency activities, while Chairman Martin Gruenberg clarified that the agency has not outright banned banks from working with crypto firms.
In response, Coinbase is pursuing legal action to uncover more information about FDIC practices, including claims of a 15% deposit cap on crypto-friendly banks. Legal experts and industry representatives are calling for transparency and fair regulatory practices to promote innovation and equal opportunities within the crypto landscape.
