Coinbase Reveals FDIC Push Against Crypto Banking
Coinbase uncovers FDIC letters urging banks to avoid crypto services, sparking concerns of government overreach and calls for transparency.
Coinbase recently revealed that the U.S. Federal Deposit Insurance Corporation (FDIC) has been advising banks to steer clear of crypto-related services. According to Coinbase, it found over 20 letters from the FDIC, dating back to March 2022, cautioning banks against engaging with the crypto industry. The FDIC raised concerns over consumer protection, financial stability, and institutional security in these communications, which crypto advocates see as an attempt to curb the industry’s growth.
Paul Grewal, Coinbase’s Chief Legal Officer, disclosed on November 1 that the discovery came from a recent Freedom of Information Act (FOIA) request. This request aimed to investigate the FDIC’s influence on banks' decisions regarding crypto services and to explore the agency’s potential role in Operation Chokepoint 2.0 — a perceived government effort to limit crypto companies' access to financial services.
Grewal expressed alarm over the content of the letters, calling them a “shameful example” of government overreach. He criticized the FDIC for acting behind what he described as a "bureaucratic curtain," stating that the public deserves transparency, especially when a regulator is influencing such a fast-growing sector.
The FDIC’s Vaughn Index, a document detailing the agency’s internal communications, shows how it has repeatedly warned banks of crypto’s potential risks. In one instance from March 2022, the FDIC advised a bank to halt all crypto-related activities until further evaluations on safety and compliance were completed. Later, in September 2022, it reportedly advised another bank to delay its crypto services, citing concerns over safety and stability.
Crypto advocates have voiced their disappointment over the FDIC's actions. Niklas Kunkel, founder of Chronicle Labs, called the agency’s approach “shameful” and accused it of contradicting statements made by Deputy Treasury Secretary Wally Adeyemo. Kunkel argued that it’s hypocritical for the agency to enforce a hidden anti-crypto policy while publicly claiming otherwise.
Similarly, Mike Belshe, CEO of BitGo, a crypto custody provider, confirmed that he has long suspected regulators of discouraging traditional banks from working with crypto companies. These recent revelations have intensified the debate on government influence in the crypto sector, with advocates arguing for clearer, more transparent policies that don’t stifle innovation in the industry.
