Federal Regulator Halts Crypto Banking Activity at U.S. Banks
In 2022, the Federal Deposit Insurance Corp. (FDIC) put a halt to or prevented crypto banking activity at numerous U.S. banks, as revealed in communications obtained by research firm History Associates Inc., hired by Coinbase Inc. (COIN).
After a legal battle, History Associates Inc. gained access to internal FDIC communications, which were heavily redacted but still showed the regulator’s actions in restricting lenders from offering or considering products and services in the digital assets sector.
One of the 23 letters shared by Coinbase stated, “We respectfully ask that you pause all crypto asset-related activity,” indicating that the FDIC would provide further guidance on engaging in crypto asset-related activities at a later date.
These letters have confirmed the suspicions of the industry that crypto businesses were systematically denied banking services by the regulator. Coinbase Chief Legal Officer Paul Grewal expressed concern over the FDIC’s actions, emphasizing the impact on the legal American industry.
The FDIC letters, dated throughout 2022, outlined that banks needed to address compliance demands before proceeding with any crypto activities. The agency raised questions regarding regulatory filings and urged banks to operate in a safe and sound manner.
While the Federal Reserve and the Office of the Comptroller of the Currency have issued cautionary guidance on crypto, formal regulations for the sector are still pending. The FDIC’s reluctance to provide clear information on the redacted letters has prompted further legal action from Coinbase.
The debanking campaign, dubbed Operation Chokepoint 2.0, has resurfaced concerns about government efforts to disconnect legal businesses from banking services. This issue was discussed in a congressional hearing where crypto business leaders, including Nathan McCauley of Anchorage Digital, highlighted their challenges in accessing financial services.
As the industry awaits more transparency from regulators, Coinbase and other stakeholders continue to push for clarity on the FDIC’s stance and its impact on the crypto banking landscape.
For more insights: Citibank Debanked Ripple’s Brad Garlinghouse Due to Crypto, Exec Says