Paul Grewal, the chief legal officer at Coinbase, has revealed letters sent by the Federal Deposit Insurance Corporation to all banks in 2022. The FDIC urged them to stop or avoid any crypto-related activity.
These letters date from March 11, 2022 and have been called “pause letters”They have repeatedly recommended that users refrain or suspend their use of crypto-services.
FDIC is concerned
The FDIC letters cited various concerns, including the agency’s lack of clarity on regulatory requirements for crypto-related activities. One excerpt noted:
“At this time, the FDIC has not yet determined what, if any, regulatory fillings will be necessary for a bank to engage in this type of activity.”
Redactions were made to many sections, possibly in order to protect proprietary information about the products or services discussed. The FDIC also emphasized the need for additional information about the banks’ crypto offerings to ensure they would operate “in a safe and sound manner.”
In the letters, the FDIC Rules and Regulations (Part 362) that governs the insured state banks were scrutinized to see if such activities are permissible. It is possible that state-chartered bank may have explored the possibility of offering crypto-related products and services by 2022.
Operation Chokepoint 2.
The release of these documents stems from Coinbase’s Freedom of Information Act (FOIA) request filed on Oct. 18, which sought clarity on an alleged 15% deposit cap imposed on crypto-friendly banks.
Grewal claimed that the letters provided evidence of “Operation Chokepoint 2.0,”It is said that the Biden administration has been trying to crush the crypto industry. He said that it was not a conspiracies theory, and the FDIC should be criticized for redacting important information and releasing just a small fraction of relevant documents.
The new US administration should reverse the policies he called “unacceptable” “politically motivated regulatory decisions.”
Grewal, according to:
“The incoming administration has the opportunity to reverse so many poor crypto policy decisions, chief among them politically motivated regulatory decisions like Operation Chokepoint 2.0.”
Other industry professionals have also expressed their disapproval of the letter and voiced concerns regarding the Federal Reserve’s involvement. The Federal Reserve is included on the majority of letters that are sent to the banks.
Caitlin Long, CEO and founder of Custodia Bank, said the Fed’s mention in the letters is evidence that the Pause letters are coordinated decisions. She described the so-called stop letters as directives intended to deter lawful cryptoactivity.
She replied:
“These weren’t ‘pause letters’ bc the pause was indefinite. These were really ‘cease & desist’ letters cloaked in legalese…designed to crush law-abiding #crypto.”
The pause letters, spanning nearly two years and nine months, suggest a coordinated effort among regulators to limit banks’ participation in cryptocurrency-related activities. Critics argue that such measures undermine the industry’s ability to innovate and expand within the US financial system.
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