Documents Coinbase made public show that U.S. banking regulators have gone out of their way to avoid having banks be involved with cryptocurrency businesses in 2022.
Legal challenge by a crypto exchange revealed the documents shed light on how federal agencies imposed limits on banking relationships with the crypto industry. For example, one set of communications dated from that year told banks to ‘pause all crypto asset related activity’ on the basis of uncertainty as to regulation.
First reported by CoinDesk, the letters show how the FDIC’s request put the banks on hold while they could clarify compliance requirements before banks began offering such services. In response, Coinbase contends that they are part of a larger effort to close off crypto companies to traditional banking.
Coinbase’s Legal Officer Criticizes FDIC’s Transparency
Yet institutional critics of the FDIC including Coinbase executives claim the documents show a calculated plan to hobble the crypto sector. Some in the industry call it ‘Operation Chokepoint 2.0,’ a practice where regulators use regulatory ambiguity as a means to block crypto firms from the financial system.
A lack of clear guidance from federal authorities is the root of ongoing tensions between crypto businesses and U.S. banks. But many banks have been unwilling to associate with crypto companies, due to the risk of regulatory compliance and fraud. In this way, the crypto industry has been unable to find reliable banking services and as a result has struggled to grow and be used alongside the wider economy.
In another passage, Coinbase’s Chief Legal Officer Paul Grewal raged at the FDIC’s lack of transparency, saying the agency has cloaked its moves behind broad redactions in the published documents. These revelations offer further confirmation that “Operation Chokepoint 2.0” is way more than nothing but a conspiracy theory, argues he said, and continues to affect interactions between U.S. financial institutions and the crypto industry.
“Law abiding American businesses should be able to access banking services without government interference. 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.”
Paul Grewal via X.
