FDIC Urges U.S. Banks to Avoid Crypto, Revealed in Coinbase Letters
Coinbase’s Paul Grewal says this is hard evidence proving the industry hasn’t been spouting conspiracy theories about being shoved out of U.S. banking. Dec 6, 2024, 1:56 p.m. UTC
The Federal Deposit Insurance Corp. (FDIC) has been revealed to have urged U.S. banks to avoid engaging in crypto-related activities, as seen in letters obtained by Coinbase Inc. (COIN) from the banking regulator. This revelation sheds light on the challenges faced by crypto businesses in accessing traditional banking services in the United States.
FDIC’s Restriction on Crypto Banking Activity
Crypto banking activity faced interruptions in 2022, with the FDIC halting or preventing such activities at a significant number of U.S. banks. Coinbase enlisted the help of History Associates Inc. to take legal action against the FDIC and the Securities and Exchange Commission, leading to the release of redacted internal communications from the banking regulator. The disclosed letters showed the FDIC’s explicit instructions to banks to pause all crypto asset-related activities until further supervisory expectations were determined.
Hard Evidence of Industry Challenges
Coinbase’s Chief Legal Officer, Paul Grewal, emphasized that the letters serve as concrete evidence that crypto businesses were systematically excluded from traditional banking services by the FDIC. The industry’s longstanding complaints about being marginalized in the banking sector were validated by the contents of these letters, demonstrating a deliberate effort by the regulator to restrict banking services to legal American crypto entities.
Call for Transparency and Accountability
Grewal highlighted the importance of uncovering the redacted portions of the letters to reveal the institutions involved, the services sought, and the compliance queries posed by the FDIC. This transparency is crucial in understanding the reasoning behind the regulator’s stance on crypto-related activities and ensuring greater accountability in the industry.
As the debate around Operation Chokepoint 2.0 continues to gain traction, with crypto businesses facing challenges accessing financial services, the need for regulatory clarity and fair treatment remains paramount. The revelations from the FDIC letters underscore the complexities and obstacles that crypto businesses encounter in navigating the traditional banking landscape. This ongoing saga highlights the evolving dynamics between the crypto industry and regulatory authorities, shaping the future of financial innovation in the United States.