U.S. Government's Push to Suppress Crypto: Coinbase Documents Expose FDIC's Role in Restricting Bank Access

Internal communications from the Federal Deposit Insurance Corporation (FDIC) have revealed a concerted effort by U.S. regulators to limit banks' involvement with crypto businesses in 2022, according to newly released documents. These revelations, obtained through a legal challenge by Coinbase, underscore the growing tension between crypto firms and federal banking authorities, exacerbated by regulatory ambiguity.
The documents, made public on December 6, 2024, highlight FDIC letters instructing banks to pause all crypto-related activities. The letters, which were directed at banks involved with cryptocurrency businesses, read, "We respectfully ask that you pause all crypto asset-related activity." The communications point to a deliberate attempt to delay or prevent banks from offering services to the crypto industry until they could resolve unclear compliance requirements.
Coinbase claims these communications expose a coordinated effort by the FDIC to restrict banking access for legitimate crypto businesses, a practice referred to by some in the industry as "Operation Chokepoint 2.0." This effort is seen as a continuation of previous regulatory strategies aimed at curbing crypto's integration with traditional financial systems.
The Strained Relationship Between Crypto and Banking
The crypto sector has long struggled to establish reliable banking partnerships in the U.S., with federal regulators often criticized for offering vague or overly cautious guidance. Banks, wary of regulatory scrutiny, fraud risks, and reputational damage, have been hesitant to engage with crypto firms. This uncertainty surrounding the regulatory landscape has led many banks to avoid servicing crypto businesses altogether, creating significant barriers for companies that rely on traditional banking services.
The FDIC’s letters illustrate this ongoing dynamic. Banks were required to address complex questions about their proposed crypto services, which often led to delays or cancellations of their plans. These roadblocks only added to the frustration of the crypto industry, which sees the lack of clear guidelines as an invitation for informal restrictions to be imposed.
Coinbase's Response: Operation Chokepoint 2.0 Confirmed
Coinbase executives have argued that the FDIC’s actions exemplify how the absence of formal crypto regulations allows regulators to impose informal measures that isolate the crypto industry from mainstream financial services. Paul Grewal, Coinbase’s Chief Legal Officer, described the documents as evidence that "Operation Chokepoint 2.0" is not just a conspiracy theory, as some critics have claimed. He pointed out that the FDIC continues to shield its actions with excessive redactions, preventing full transparency.
"Operation Chokepoint 2.0" is a term used by crypto advocates to describe what they perceive as deliberate government efforts to prevent crypto businesses from accessing traditional banking services. Critics argue that such regulatory tactics stifle legal businesses in the sector by cutting them off from necessary financial infrastructure.
Grewal emphasized the need for a reversal of these policies, saying, "Law-abiding American businesses should be able to access banking services without government interference. The incoming administration has the opportunity to reverse these poor crypto policy decisions, chief among them politically motivated regulatory decisions like Operation Chokepoint 2.0."
As the documents continue to raise questions about the FDIC's role in restricting crypto access to banking, the debate over regulatory clarity and the future of crypto in the U.S. financial system remains unresolved.
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