Coinbase Uncovers FDIC Letters Indicating Crypto Operation Chokepoint 2.0
The cryptocurrency community is discussing Operation Chokepoint 2.0 following Coinbase Global Inc (NASDAQ: COIN) obtaining evidence against US regulators. The Federal Deposit Insurance Corporation (FDIC) sent letters to banks in 2022, requesting the withholding of services from crypto firms.
Coinbase Obtains Redacted Documents From FDIC
Coinbase uncovered this evidence through History Associates Inc. As reported by Coinspeaker, Coinbase took both the FDIC and the Securities and Exchange Commission (SEC) to court earlier this year, gaining access to some internal communications from the FDIC.
Despite heavy redactions, the documents indicated that banking regulators restricted crypto firms. One of 23 letters to US banks stated, “respectfully ask that you pause all crypto asset-related activity.”
The FDIC noted it would inform banks later about supervisory expectations for engaging with crypto assets.
According to Coinbase CLO Paul Grewal, these letters represent only a portion of the FDIC's documents. He views them as evidence of the regulator's efforts to prevent the crypto industry from engaging with banks, dismissing the notion of conspiracy theories.
Re: the letters that show Operation Chokepoint 2.0 wasn't just some crypto conspiracy theory. @FDICgov is still hiding behind way overbroad redactions. And they still haven't produced more than a fraction of them. But we finally got the pause letters: https://t.co/Me41BXpbdF…
— paulgrewal.eth (@iampaulgrewal) December 6, 2024
Grewal does not see the FDIC or SEC's actions as speculation but rather as a deliberate strategy. Many financial institutions' names were also redacted in the documents.
US Regulators Fail to Provide Clarity on Crypto Regulations
The evidence suggests bankers could not receive FDIC approval for crypto activities. Banks were required to demonstrate compliance, which remained unclear at the time. Coinbase found that some activities were halted even before starting, and some banks were advised against expansion pending reviews.
An example included an FDIC letter stating, “We expect you to satisfactorily address these and any subsequent questions (in advance of implementation) to ensure the bank of operating in a safe and sound manner.”
The letters highlighted the FDIC's lack of clarity regarding regulatory requirements for approving crypto businesses. Currently, the three main US banking regulators—Federal Reserve, Office of the Comptroller of the Currency, and FDIC—have not issued formal rules for regulating the crypto sector.
Grewal indicated that the next step involves the federal court seeking to remove redactions from the documents to further the investigation.