U.S. Bank Regulator Urges Caution in Crypto Sector
WASHINGTON, Jan 3 (Reuters) – A U.S. bank regulator has advised banks to exercise caution when dealing directly with cryptocurrencies in 2022 and 2023. However, the regulator did not mandate a complete halt to providing banking services to crypto companies, despite industry concerns about widespread “debanking.” This information was revealed in documents released on Friday.
Judge Orders Release of Supervisory “Pause Letters”
Following a lawsuit filed by research firm History Associates Incorporated, which was hired by crypto exchange Coinbase (COIN.O), a judge ordered the Federal Deposit Insurance Corporation (FDIC) to disclose versions of supervisory “pause letters” sent to undisclosed banks. The FDIC initially released the letters in December but was instructed by the judge to make more detailed redactions. The revised set of 25 letters includes two additional letters that were not part of the original submission.
Campaign Against Debanking
The legal battle between Coinbase and the FDIC is part of an ongoing effort by crypto companies to expose what they perceive as a deliberate attempt by U.S. bank regulators to restrict their access to traditional financial services. Coinbase’s chief legal officer, Paul Grewel, highlighted the coordinated efforts revealed in the less redacted letters and called for further scrutiny by Congress.
Insights into the Supervisory Process
The released documents offer a rare glimpse into the confidential bank supervisory process. While FDIC examiners have shown caution towards the crypto sector due to issues like scams and volatility, they have not mandated a complete severance of ties with the industry. Instead, banks have been advised to pause certain crypto activities or provide detailed information before proceeding further.
Internal Memo on Crypto Engagement
In a bid to address industry concerns, the FDIC also published an internal memo outlining how supervisors should evaluate banks’ involvement in crypto assets. The memo distinguishes between direct crypto activities and traditional banking services for crypto clients, emphasizing the need for stricter scrutiny in the former category.
Looking Ahead
The release of these documents comes ahead of the anticipated crypto policy overhaul by President-elect Donald Trump’s administration. It is speculated that Trump may issue an executive order directing bank regulators to adopt a more lenient stance towards the crypto sector. However, the FDIC remains cautious, citing safety, soundness, and consumer protection risks associated with crypto-related activities.
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