What to know:
- A crypto industry court fight with the Federal Deposit Insurance Corp. has resulted in confidential crypto banking documents being shared publicly.
- Coinbase says copies of FDIC letters are proof that the U.S. banking regulator has been instructing banks not to handle crypto business.
As a seasoned researcher with a keen interest in the intersection of finance and technology, I have been closely monitoring the developments within the crypto industry. The recent revelation of the Federal Deposit Insurance Corporation (FDIC) letters to U.S. banks regarding their handling of cryptocurrency business has piqued my curiosity and raised some concerns.
2022 saw crypto-related banking activities being halted or restricted at numerous American banks, as reported by a research firm contracted by Coinbase Inc. (COIN), following the release of their findings.
In June, Coinbase’s legal representative, History Associates Inc., successfully sued both the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC), gaining access to some of the FDIC’s internal communications. On Friday, partially censored documents were released, revealing that the banking regulator had expressed concerns about banks offering or considering services related to digital assets, effectively putting a halt on their progress in this sector.
In simpler terms, the regulatory body politely requests that you halt any transactions involving digital currencies. Later, they plan to inform all banks regulated by the FDIC about their expectations regarding involvement in crypto asset-related activities.
For years, the industry has voiced concerns about facing a financial crisis where American banks restrict services to both established companies and prominent figures in the cryptocurrency sector. Coinbase’s Chief Legal Officer, Paul Grewal, contends that these letters serve as clear proof that crypto businesses have been systematically barred from banking by regulators.
In an interview with CoinDesk, Grewal stated that the evidence clearly demonstrates this wasn’t some wild conspiracy theory or mere speculation. Instead, it was a deliberate strategy by the FDIC to refuse banking services to a legitimate American industry. This fact should make everyone think deeply about the situation.
Despite many parts of the FDIC letters being blacked out and specific banks not being named, communications from 2022 suggest that various crypto-related activities proposed by banks were put on hold due to unclear answers about how they would meet compliance requirements. In certain instances, these activities were halted before they began, while in others, the agency appeared to advise against further expansion or requested banks to pause a particular line of business until a thorough review of their request was completed.
As a responsible crypto investor, I understand that it’s crucial for me to thoroughly address all questions, including those that may arise in the future, prior to any implementation. This is to ensure that my investments are made in a secure and stable environment, maintaining the integrity of my operations.
In some of the private correspondence, several intricate and challenging queries regarding banking operations were presented. However, numerous records suggested that the agency was still unsure about which regulatory submissions would be necessary to approve cryptocurrency activities.
In the United States, although the main financial regulatory bodies such as the Federal Reserve and the Office of the Comptroller of the Currency, along with another unnamed entity, have given some general warnings regarding cryptocurrencies, they haven’t yet established a definitive set of laws to govern this field.
A representative from the FDIC didn’t provide an immediate response when asked for a comment about the letters that were sent outside of regular business hours on Thursday.
Grewal stated that in the next phase at the federal court, they plan to ask for the removal of the blackouts, thereby disclosing the involved institutions, their proposed services, and all the queries posed to them. This action aims to uncover the reasons behind the FDIC’s position, he explained.
Despite repeated court orders from federal courts mandating the FDIC to disclose this information, they seem unwilling to comply promptly, and we believe it is past due for them to cease such delay.
In the financial sector, the anti-debanking movement is often referred to as Operation Chokepoint 2.0, following an earlier initiative by the government aimed at disconnecting legitimate but contentious businesses from banking services. This issue resurfaced in Congress this week during a meeting of the House Financial Services Committee, where executives from cryptocurrency companies stated that they had been denied access to financial services.
Nathan McCauley, CEO of Anchorage Digital (a U.S.-chartered federal bank overseen by the OCC), mentioned that they have been “de-banked” as well. This is unexpected given that we, in fact, operate as a national bank ourselves.
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2024-12-06 17:19