FDIC releases redacted letters exposing anti-crypto actions

The Federal Deposit Insurance Corporation (FDIC) has released previously redacted letters revealing its efforts to curb crypto-related activities in banks, a part of an operation informally called Operation Choke Point 2.0.

These letters indicate a push by the FDIC to block financial institutions from engaging with the cryptocurrency industry, despite its role in ensuring banking stability.

Between March 2022 and May 2023, the FDIC sent over twenty-five letters to banks requesting them to “pause” or “refrain from expanding” crypto-related services.

These letters stated that the FDIC had not determined what regulatory filings, if any, would be necessary for banks to offer crypto services.

The letters were only made public after Coinbase filed a Freedom of Information Act (FOIA) request, which was initially denied, prompting a court order in June 2024 to release the documents.

In these letters, the FDIC insisted that banks cease any crypto-related operations without providing a timeline for resumption.

The letters also demanded excessive paperwork from banks seeking to offer simple crypto services.

For example, one institution attempting to allow its customers to purchase Bitcoin through online banking was hit with a three-page questionnaire covering topics like the bank's strategic plan and an analysis of SEC Staff Accounting Bulletin 121 (SAB 121), an accounting standard making it more difficult for banks to work with crypto clients.

The FDIC also issued lengthy inquiries to banks wanting to offer blockchain-based services, questioning their governance structures, risk management procedures, and accounting methods for digital assets.

Another theme seen in letters starting from September 2022 was a request for confidentiality, adding another layer of opacity to the FDIC’s actions.

Coinbase’s Chief Legal Officer Paul Grewal criticised the regulator's actions, calling for congressional hearings to investigate the matter.