- The regulator’s internal memo distinguished between direct crypto activities and standard banking services.
- Coinbase has accused the FDIC of a coordinated effort to exclude crypto firms from traditional banking services.
The US banking sector’s turbulent relationship with cryptocurrency came under scrutiny once again as newly released documents shed light on the Federal Deposit Insurance Corporation’s (FDIC) supervisory approach.
Contrary to industry allegations of a coordinated “debanking” effort, the FDIC advised caution without outright prohibiting banking services for crypto companies, Reuters reported. This revelation came amid increasing tensions between regulators and the volatile crypto sector.
A federal judge compelled the FDIC to release updated versions of “pause letters” sent to various banks in 2022 and 2023. These letters, initially disclosed in December, required additional revisions to reduce redactions. Coinbase, a prominent cryptocurrency exchange, instigated the legal action, claiming these documents highlight an organized attempt to exclude crypto firms from traditional banking.
Among the 25 letters unveiled, two additional correspondences that had not been part of the FDIC’s earlier disclosures were reportedly included. These letters directed banks to either pause their involvement in crypto initiatives or undergo extensive assessments before proceeding with crypto-related ventures. While they emphasized caution, the documents stopped short of mandating a complete withdrawal from crypto-related banking services.
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Differentiating Services and Direct Crypto Activities
The FDIC also released a 2022 internal memo to clarify its position. The memo distinguished between banks directly engaging in crypto activities, such as holding digital assets in custody, and providing traditional banking services to crypto-related clients, like lending or deposit accounts. It stated that while the former warranted stricter scrutiny, offering standard banking services to crypto firms did not constitute a supervisory red flag.
Coinbase’s Chief Legal Officer, Paul Grewel, reacted strongly on X to the documents, describing them as evidence of a “coordinated effort to stop a wide variety of crypto activity.” He called for further investigation by Congress to scrutinize the regulator’s actions.
The exchange’s response comes amid a broader campaign by Coinbase and other crypto entities to challenge what they perceive as systemic resistance from US financial authorities.
The FDIC disclosures arrive at a pivotal time, with the incoming administration expected to outline a significant crypto policy overhaul. Speculation suggests that President-elect Donald Trump may issue an executive order urging regulators to adopt a more lenient stance towards the crypto industry.
