Coinbase Discovers FDIC Letters Advising Banks to Avoid Crypto Services

Coinbase disclosed that the U.S. Federal Deposit Insurance Corporation (FDIC) has advised banks against engaging with crypto-related services. The company found over 20 letters from the FDIC, dating back to March 2022, which raised concerns about consumer protection, financial stability, and institutional security. Crypto advocates view this as an attempt to limit the industry's growth.

On November 1, Paul Grewal, Coinbase’s Chief Legal Officer, stated that this information emerged from a Freedom of Information Act (FOIA) request aimed at understanding the FDIC's influence on banks regarding crypto services and its potential involvement in Operation Chokepoint 2.0, a perceived initiative to restrict crypto companies' access to financial services.

Grewal criticized the FDIC for lacking transparency, labeling the letters as a “shameful example” of government overreach. He emphasized the need for public awareness when regulators impact rapidly growing sectors.

The FDIC’s Vaughn Index reveals the agency's warnings to banks concerning crypto risks. For instance, in March 2022, it advised one bank to cease all crypto activities until safety and compliance evaluations were completed. In September 2022, another bank was advised to postpone crypto services due to safety and stability concerns.

Crypto advocates expressed disappointment with the FDIC's actions. Niklas Kunkel, founder of Chronicle Labs, characterized the agency's approach as “shameful” and accused it of hypocrisy for enforcing an anti-crypto policy while publicly denying such claims. Mike Belshe, CEO of BitGo, echoed these sentiments, indicating longstanding suspicions that regulators discourage traditional banks from partnering with crypto firms. These revelations have sparked intensified discussions on government influence in the crypto sector, with calls for clearer policies that promote innovation rather than hinder it.