Court documents filed in a Freedom of Information Act (FOIA) lawsuit against the United States Federal Deposit Insurance Corporation (FDIC) showed the US regulatory body asked certain financial institutions to pause crypto banking activities.
In a Dec. 6 filing in the US District Court for the District of Columbia, the court released “pause letters” sent by FDIC officials to the boards of directors for different US banks, whose names were redacted.
According to the letters sent in 2022, the FDIC requested the institutions “pause all crypto asset-related activity” in response to the uncertain regulations around digital assets.
“The FDIC will notify all FDIC-supervised banks at a later date when a determination has been made on the supervisory expectations for engaging in a crypto asset-related activity, including the need for any regulatory filings,” said some of the letters.
The court filing was part of a FOIA lawsuit filed by History Associates in June. Cryptocurrency exchange Coinbase — also involved in an enforcement action filed by the US Securities and Exchange Commission — hired the firm to submit a FOIA request to the FDIC over allegations of debanking crypto firms. The request was denied, leading to the lawsuit.
Conspiracy theory or evidence of a US government policy?
Other letters in the Dec. 6 filing told banks they may need to provide information before offering any additional services. Though much of the text has been redacted, some of the FDIC letters suggested that the financial institutions were considering activities related to cryptocurrencies.
“[T]he letters that show Operation Chokepoint 2.0 wasn’t just some crypto conspiracy theory,” said Coinbase chief legal officer Paul Grewal in a Dec. 6 X post. “[The FDIC] is still hiding behind way overbroad redactions.”
Related: Former US solicitor general claims regulators want to ‘debank’ crypto
Operation Chokepoint 2.0 is a colloquial term used by many in the industry to claim that the US government was attempting to pressure banks into cutting ties with crypto companies.
The original Operation Choke Point initiative that ran from 2013 to 2017 focused on banks dealing with payday lenders and other high-risk activities.
In November, several high-profile executives from crypto firms took to social media to claim that in 2023, they had been contacted by banks and told their accounts would be closed due to their ties to digital assets.
Coinbase CEO Brian Armstrong said on Nov. 27 that the FOIA request with the FDIC was still in progress but could lead to information as to whether any government officials broke the law.
FDIC Chair Martin Gruenberg is expected to retire on Jan. 19, just one day before the incoming administration under Donald Trump takes office. At the time of publication, Trump had not announced any potential replacement for leading the regulatory body.
Magazine: Crypto has 4 years to grow so big ‘no one can shut it down’: Kain Warwick, Infinex