US gov told banks to suppress crypto, Coinbase documents show

Internal communications from the Federal Deposit Insurance Corporation suggest that the agency has deliberately limited U.S. banks’ participation in crypto activities in 2022.

These communications, highlighted by Coinbasehighlight how regulatory ambiguity has fueled tensions between crypto companies and federal banking authorities.

THE documentsobtained thanks to a legal challenge by Coinbase and published on Friday, include letters asking banks to suspend all cryptocurrency-related activities.

“We respectfully request that you suspend all activities related to crypto assets,” the documents state.

These FDIC the guidance would have delayed or halted banks’ plans to offer crypto services until they could meet unclear compliance requirements.

CoinDesk was the first to report this news.

Coinbase complaints These communications reveal a coordinated effort to restrict banking access to legitimate crypto businesses, a practice some in the industry are calling “Operation Chokepoint 2.0.”

Crypto’s fractured relationship with banking

For years, crypto companies have struggled to maintain reliable banking partnerships in the United States, citing vague information or overly cautious advice federal regulators. Banks are hesitant to engage with crypto companies due to concerns over regulatory compliance, fraud risks and potential reputational damage.

Without clear rules, many banks are avoiding the sector altogether, creating a significant barrier for crypto businesses that rely on traditional banking services to operate.

The FDIC letters seem to underscore this dynamic. The communications show that the agency asked banks to answer complex questions about the proposed crypto activities. These investigations have often delayed approvals or led banks to abandon their projects.

Coinbase executives say the lack of formal cryptography guidelines allows regulators to impose informal restrictions, thereby insulating the crypto industry from traditional financial services.

The letters “show that Operation Chokepoint 2.0 was not just a cryptographic conspiracy theory. [The FDIC] always hides behind overly broad redactions,” wrote CLO Paul Grewal of Coinbase on X.

Operation Chokepoint 2.0, as crypto proponents claim, describes regulatory efforts to limit the crypto industry’s access to banking services. Critics say this approach stifles legal crypto businesses by effectively cutting them off from traditional financial infrastructure.

“Law-abiding American businesses should be able to access banking services without government interference. The new administration has the opportunity to undo so many bad crypto policy decisions, chief among them politically motivated regulatory decisions like Operation Chokepoint 2.0.

Paul Grewal via X.