FDIC Told Banks to Pause Bitcoin Services Pending New Guidelines, Coinbase Reveals

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Coinbase revealed new details about the Federal Deposit Insurance Corporation’s (FDIC) attempts to restrict banks from engaging in crypto-related transactions.

The truths being shared are causing people to criticize the U.S. regulator, with some suggesting that a modern-day version of Operation Chokepoint could be happening.)

FDIC’s Crypto Directives Draw Parallels to Operation Chokepoint

On January 3rd, Coinbase’s Chief Legal Officer, Paul Grewal, disclosed further FDIC correspondence encouraging banks to reduce their activities in the cryptocurrency sector. According to Grewal, these letters, which span various aspects of cryptocurrency transactions and advanced services, are part of a larger effort aimed at curtailing the growth of the crypto industry.

It’s worth mentioning that FDIC discovered TWO additional letters in its search, despite previously claiming compliance with a previous Court order. It’s becoming increasingly difficult to trust their sincerity as more questions arise each time a new issue is uncovered. Grewal suggested that the new Congress should promptly hold hearings on this matter without delay.”

This version maintains the original meaning but is slightly rephrased for clarity and natural flow of language.

According to recently disclosed information, from 2022 up until 2023, the FDIC guided certain financial institutions to cease any crypto-based services they were offering. This was due to the agency’s need to assess potential risks and establish clear regulatory standards. One such letter expressed apprehensions about Bitcoin transactions handled through collaborative partnerships, urging banks to temporarily halt these activities until more information became available.

The suggested product allows bank clients to interact with cryptocurrencies, particularly Bitcoin transactions, using a third-party service. At present, it’s unclear if any regulatory paperwork is required for banks to participate in this kind of activity, as the FDIC has not made a decision yet. Therefore, we kindly request you to halt all activities related to cryptocurrencies.

Ripple‘s Chief Legal Officer, Stuart Alderoty, pointed out that the FDIC guidelines appear to discourage banks from participating in any cryptocurrency-related activities. He noted the uncommon strategy of addressing bank boards directly, suggesting it was an intentional action aimed at creating a sense of unease or apprehension.

Alderoty stated that these letters strongly imply an urgent halt of all cryptocurrency-related operations without exception, not just those specifically mentioned. Writing personally to the Board is a significant and purposeful move. These letters are designed to create a powerful impact within the bank.

As a researcher, I’m sharing some intriguing insights: Coinbase CEO Brian Armstrong has suggested that legal action might be imminent, expressing confidence in potential judicial intervention to tackle these regulatory oversteps. In his view, the FDIC’s actions are unconstitutional and he advocates for regulatory bodies to uphold existing laws rather than innovating new ones.

Armstrong stated that it’s the duty of regulators to uphold the law, not to circumvent Congress and establish their own rules. According to our constitution, the power to create laws lies with Congress alone. In essence, such actions can be deemed unconstitutional and illegal. I eagerly anticipate a judge’s perspective on this matter.

In a similar vein to Operation Chokepoint, the FDIC’s actions have stirred memories. This program aimed to influence specific industries by indirectly exerting pressure on financial institutions. A recent survey has shown that crypto-related businesses encounter substantial banking difficulties unlike other sectors such as real estate or private credit, which do not report similar problems.

Attorney John Deaton has stepped forward to spearhead a federal probe regarding this matter. He believes that the current surge of regulatory control exceeds mere overstepping and directly confronts the fundamental ideals of a free market system.

It appears that ChokePoint 2.0 is no longer simply an issue of excessive regulation. Instead, it represents a deliberate attack on the fundamental values of American free-market capitalism. At its heart, our economic system relies on fair competition, innovation, and equal opportunities – not on regulators secretly deciding which companies will succeed or fail in private meetings. This is according to Deaton’s statement.

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2025-01-05 13:26