The Federal Deposit Insurance Corporation (FDIC) is gearing up to update its guidelines for banks engaging in crypto-related activities, as reported by Barrons on Feb. 5.
The proposed changes would permit banks to partake in specific crypto-related activities without the need for prior regulatory approval. Some banks have been in discussions with government officials to push for offering crypto custody services and exploring tokenized deposits as a potential substitute for stablecoins.
Tokenized deposits could potentially merge checking accounts with blockchain technology, indicating a shift towards adapting banking infrastructure to the changing digital asset landscape.
Newly released documents related to “pause letters” were made public by the FDIC on Feb. 5. These documents are linked to the 2022 pause letters, which were sent to 24 financial institutions, advising them to halt or refrain from offering crypto-related services.
FDIC acting chairman Travis Hill stated, “Our decision to release these documents reflects a commitment to enhance transparency, beyond what is required by the Freedom of Information Act (FOIA), while also trying to fulfill the spirit of the FOIA request.”
These documents were released in response to a FOIA request filed by Coinbase on Oct. 18, seeking clarity on an alleged 15% deposit cap imposed on crypto-friendly banks. The FDIC complied with the request in December 2024, although the documents were heavily redacted. A less censored version was published on Jan. 3.
Coinbase’s chief legal officer, Paul Grewal, mentioned that the regulator withheld information because two more letters were included in the uncensored documents. In a post on Feb. 5, he reiterated the allegations, claiming that the FDIC was concealing additional pause letters.
Hill acknowledged that the released documents show that banks requesting crypto-related services faced resistance, with the FDIC repeatedly asking for more information and remaining unresponsive for extended periods. He also mentioned that the regulator’s actions deterred banks from pursuing crypto-related services.
Grewal pointed out instances in the shared documents where banks succumbed to the regulator’s pressure. He highlighted the FDIC’s use of “regulation by exhaustion,” which involved sending letters requesting the halt of crypto-related services, seeking clarification, and then putting the banks on hold until they abandoned their crypto offerings.
The FDIC cited reasons such as BTC volatility, reputational risk, and consumer protection risk for pausing services. Caitlin Long, founder and CEO of Custodia Bank, highlighted multiple instances in the documents where the term “deposit” was mentioned, suggesting a caution against receiving deposits from crypto firms.
As the FDIC considers revising its guidelines, the banking industry awaits potential changes that could shape the future of crypto-related activities within traditional financial institutions.