FDIC Advises Banks to Halt Crypto Services Amid Controversy
Coinbase reports that the Federal Deposit Insurance Corporation (FDIC) has urged banks to temporarily suspend cryptocurrency-related activities, leading to controversy reminiscent of “Operation Chokepoint.” Industry leaders, including Coinbase and Ripple, argue that these actions overstep constitutional limits and aim to suppress the crypto sector.
FDIC's Directives
On January 3, Coinbase’s Chief Legal Officer, Paul Grewal, revealed that the FDIC issued additional letters instructing banks to limit services related to cryptocurrencies, including Bitcoin transactions. Grewal noted the lack of transparency, stating, "FDIC magically found two more pause letters after claiming compliance with a court order." He called for congressional hearings to investigate these actions.
Concerns Over Bitcoin Transactions
Between 2022 and 2023, the FDIC directed certain banks to suspend crypto services while assessing risks and finalizing guidelines. One letter specifically addressed concerns regarding Bitcoin transactions through third-party partnerships, urging a pause until further regulatory instructions were provided. The letter stated, “At this time, the FDIC has not determined what filings will be necessary for a bank to engage in this type of activity.”
Industry Reactions
Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the FDIC’s actions as discouraging banks from engaging in crypto business. He described the tactic of addressing bank boards directly as an attempt to intimidate institutions, stating, "These letters scream one message: shut down everything crypto-related ASAP."
Coinbase CEO Brian Armstrong expressed confidence in judicial processes to address what he considers unconstitutional actions, emphasizing that regulatory agencies should enforce existing laws rather than create new ones. He asserted, "The Constitution grants lawmaking powers solely to Congress."
Reviving "Operation Chokepoint" Concerns
The FDIC’s actions have drawn parallels to “Operation Chokepoint,” where regulatory pressure targeted specific industries. Recent surveys indicate that crypto-focused firms face significant banking challenges, unlike sectors such as real estate or private credit.
Call for Investigation
Attorney John Deaton has called for a federal investigation, arguing that these measures represent regulatory overreach and threaten free-market principles. He stated, "ChokePoint 2.0 is not just regulatory overreach. It’s a direct challenge to American free-market capitalism, which thrives on competition, innovation, and equal opportunity."
Future Legal Actions
As criticism mounts, Coinbase and other crypto leaders are preparing for further legal battles against what they perceive as unjust regulatory interference.