FDIC urges banks to halt crypto-related services

Coinbase recently disclosed actions by the Federal Deposit Insurance Corporation (FDIC) urging banks to pause crypto-related services, including Bitcoin (CRYPTO:BTC) transactions, until regulatory guidelines are finalised.

This move has sparked comparisons to "Operation Chokepoint," a controversial initiative that targeted specific industries in the past.

Paul Grewal, Coinbase’s Chief Legal Officer, revealed FDIC letters from 2022-2023 that directed banks to halt crypto services.

These directives reportedly aimed to evaluate risks and establish regulations.

One letter expressed concerns over Bitcoin transactions via third-party partnerships, urging banks to suspend such activities while awaiting further guidance.

“The proposed product is apparently an avenue for bank customers to engage in crypto asset activity, specifically Bitcoin transactions, through a third-party arrangement. However, 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. As a result, we respectfully ask that you pause all crypto asset-related activity,” stated the FDIC letter.

Ripple’s Chief Legal Officer, Stuart Alderoty, criticised the FDIC’s approach, suggesting it was designed to deter banks from engaging in crypto.

He highlighted the unusual tactic of addressing bank boards directly, saying it sent “shockwaves” through the banking industry.

“These letters scream one message: shut down everything crypto-related ASAP — not just the products and services mentioned. Writing directly to the Board is a rare and deliberate step,” said Alderoty.

Coinbase CEO Brian Armstrong argued that the FDIC's actions were unconstitutional, asserting that only Congress has the authority to create laws.

“Regulators should be enforcing the law, not trying to bypass Congress and create their own laws,” Armstrong stated.

The situation has drawn parallels to "Operation Chokepoint" and raised concerns about regulatory overreach.

Attorney John Deaton called for a federal investigation, describing the FDIC’s actions as an assault on free-market principles.