Crypto Banking Activity Paused by FDIC at Multiple U.S. Banks in 2022
Crypto banking activity faced a significant setback in 2022 as the Federal Deposit Insurance Corp. (FDIC) put a halt to or prevented such activities at numerous U.S. banks. This information was revealed through communications obtained by research firm History Associates Inc., hired by Coinbase Inc. (COIN).
After a legal battle, History Associates Inc. managed to secure access to internal FDIC communications, which were heavily redacted. These documents, which were unveiled on Friday, showcased the FDIC’s firm stance against banks offering or considering products and services related to digital assets.
One of the letters shared by Coinbase contained a direct instruction from the regulator, stating, “We respectfully ask that you pause all crypto asset-related activity.” The FDIC emphasized that a determination on the supervisory expectations for engaging in crypto asset-related activity would be communicated to FDIC-supervised banks at a later date.
These revelations have shed light on the challenges faced by the crypto industry, with many companies and key figures encountering obstacles in accessing banking services. Coinbase’s Chief Legal Officer, Paul Grewal, highlighted that these letters serve as concrete evidence of the systematic denial of banking services to the crypto sector by the regulator.
Grewal stated in an interview with CoinDesk, “The letters show that this was no conspiracy theory at all… There was a concerted plan on the part of the FDIC to deny banking services to a legal American industry.”
Crypto Banking Restrictions and Compliance Demands
While the specific institutions and detailed content of the FDIC letters remain undisclosed due to redactions, it is evident from the communications dated throughout 2022 that various crypto activities proposed by bankers were put on hold pending clarification on compliance requirements. In some cases, banks were advised to halt planned activities, while in others, the agency sought more information before allowing further expansion.
The FDIC’s emphasis on ensuring banks operate in a safe and sound manner was evident in the letters, with detailed questions and requests for clarification on compliance measures. However, the lack of clear regulatory guidelines for the crypto sector posed challenges for both banks and regulators.
Despite some general guidance from primary banking regulators in the U.S., including the Federal Reserve and the Office of the Comptroller of the Currency, a formal set of rules governing crypto activities is yet to be established.
Call for Transparency and Clarity
As the legal battle continues, Coinbase’s representatives are pushing for transparency and clarity regarding the FDIC’s stance on crypto banking activities. Grewal emphasized the importance of revealing the institutions involved, the services they intended to offer, and the specific compliance requirements outlined by the regulator.
Operation Chokepoint 2.0, as the debanking campaign has been termed in the industry, has raised concerns about the exclusion of legal businesses from banking services. The recent discussions in Congress regarding the challenges faced by crypto companies in accessing financial services further highlight the need for regulatory clarity and fairness.
As the industry navigates these regulatory challenges, the call for a more inclusive and transparent approach towards crypto banking activities remains a key priority for stakeholders.