Coinbase Uncovers FDIC Pause Letters in Fight for Crypto Clarity

November 3, 2024 at 01:45 AM GST updated: November 3, 2024 at 01:39 AM 3 mins read News

• Coinbase has received over 20 FDIC ‘pause letters’ instructing banks to halt crypto services.
• Coinbase filed FOIA lawsuits against the FDIC and SEC for crypto regulatory clarity.
• FDIC starts releasing documents to Coinbase following a legal push for transparency.

Coinbase Global Inc. has escalated its pursuit of clarity from US regulators, especially the Federal Deposit Insurance Corporation (FDIC), in its efforts for transparency in cryptocurrency regulation. The company recently reported that the FDIC started disclosing information as part of Coinbase’s Freedom of Information Act (FOIA) request, marking a shift in the regulatory agency’s previous stance. 

As per Coinbase CLO Paul Grewal, this provides information on how the agency has restricted banking for crypto firms. Grewal disclosed on X that Coinbase has ramped up requests for records from the FDIC, which shows that the regulator conceals the information that could explain its position on cryptocurrencies.

Coinbase supports clarifying the legal framework for the industry in the United States, stating that such standards should coincide with the current legislation.

Coinbase’s FOIA Requests Reveal ‘Pause Letters’ from FDIC

Coinbase’s legal battle with regulatory authorities began in June when the company filed a FOIA lawsuit against the FDIC and the Securities and Exchange Commission (SEC). The exchange sought to uncover documents, specifically “pause letters,” which allegedly instructed banks to cease providing services to cryptocurrency businesses. These letters, which Coinbase linked to Operation Chokepoint 2.0, underscore the company’s claim that U.S. financial regulators have used multiple strategies to curb the digital asset industry’s access to traditional financial services.

Grewal stated that Coinbase has received over 20 such letters from the FDIC, which include directives urging banks to halt, pause, or avoid offering crypto-banking services. According to Coinbase, these findings indicate a coordinated approach to restricting access to financial services for crypto-focused firms. The company’s discovery has fueled further calls for transparency within regulatory frameworks, especially concerning the cryptocurrency sector’s compliance with established financial standards.

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Calls for Transparency and the Impact on U.S. Crypto Policy

Coinbase has criticized the SEC and FDIC’s regulatory actions, accusing the agencies of disproportionately targeting crypto firms. Recently, Coinbase filed additional FOIA requests with the FDIC, seeking documents on potential restrictions on the volume of digital assets held by depository institutions. The exchange has also pursued related lawsuits to compel the SEC and FDIC to clarify their regulatory stance on cryptocurrencies.

Coinbase’s legal actions against the SEC and FDIC have broader implications for the digital asset sector. In its FOIA lawsuits, Coinbase has argued that regulatory agencies operate under a “bureaucratic curtain,” undermining transparency and inhibiting the crypto sector’s potential within the U.S. financial system. Coinbase believes the consistent withholding of information and regulatory pressure on banks to sever ties with crypto clients stifle the industry’s ability to thrive.

The Blockchain Association, an industry group advocating for crypto interests, recently reported substantial financial burdens on crypto companies due to the SEC’s approach under Chair Gary Gensler.

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