FDIC Letters to Banks Urging Caution in Crypto Activities
- Chief legal officer of Coinbase, Paul Grewal, revealed FDIC letters to banks advising against crypto-related activities
- Letters, known as “pause letters,” suggest banks suspend or abstain from engaging in crypto services
FDIC Concerns and Regulatory Uncertainty
The FDIC expressed concerns in the letters regarding the lack of clarity on regulatory requirements for crypto-related activities. One section highlighted:
“At this time, the FDIC has not yet determined what, if any, regulatory filings will be necessary for a bank to engage in this type of activity.”
The documents contained redacted sections, possibly to protect proprietary information. The FDIC emphasized the importance of banks providing additional information on their crypto offerings to ensure safe operations.
The letters also scrutinized the legal analysis conducted by banks regarding the permissibility of crypto activities under Part 362 of the FDIC Rules and Regulations, indicating potential exploration by state-chartered banks in 2022.
Operation Chokepoint 2.0 Allegations
Coinbase’s FOIA request revealed information on an alleged 15% deposit cap on crypto-friendly banks, leading to claims of “Operation Chokepoint 2.0.” Grewal criticized the FDIC for withholding critical information and called for regulatory reversals by the new administration.
Industry figures like Caitlin Long raised concerns about the involvement of the Federal Reserve in the letters, suggesting coordinated efforts to limit banks’ involvement in crypto activities. Long characterized the pause letters as indefinite directives aimed at stifling lawful crypto operations.
The prolonged nature of the pause letters, spanning almost three years, indicates a unified regulatory approach to restrict banks from engaging in cryptocurrency activities. Critics argue that such measures impede innovation and growth within the US financial system.
