US gov told banks to suppress crypto, Coinbase documents show

Internal Federal Deposit Insurance Corporation communications suggest the agency deliberately limited U.S. banks’ involvement with crypto businesses in 2022.

These communications, brought to light by Coinbase, highlight how regulatory ambiguity has fueled tension between crypto firms and federal banking authorities.

The documents, obtained through a legal challenge by Coinbase and released on Friday, include letters instructing banks to pause all activities related to cryptocurrencies. 

“We respectfully ask that you pause all crypto asset-related activity,” the documents read. 

These FDIC directives reportedly delayed or halted banks’ plans to offer crypto services until they could address unclear compliance requirements. 

CoinDesk was the first to report this news. 

Coinbase claims these communications reveal a coordinated effort to restrict banking access for legitimate crypto businesses, a practice some in the industry refer to as “Operation Chokepoint 2.0.”

Crypto’s fractured relationship with banking

For years, crypto companies have struggled to maintain reliable banking partnerships in the U.S., citing vague or overly cautious guidance from federal regulators. Banks are hesitant to engage with crypto firms due to concerns about regulatory compliance, fraud risks, and potential reputational harm. 

Without clear rules, many banks avoid the sector altogether, creating a significant hurdle for crypto businesses that rely on traditional banking to operate.

The FDIC’s letters appear to underscore this dynamic. The communications show that the agency required banks to answer complex questions about their proposed crypto activities. These inquiries often delayed approvals or led banks to abandon their plans. 

Coinbase executives argue that the lack of formal crypto guidelines allows regulators to impose informal restrictions, effectively isolating the crypto industry from mainstream financial services.

The letters “show Operation Chokepoint 2.0 wasn’t just some crypto conspiracy theory. [The FDIC] is still hiding behind way overbroad redactions,” wrote Coinbase’s CLO Paul Grewal on X. 

Operation Chokepoint 2.0, as alleged by crypto proponents, describes regulatory efforts to limit the crypto industry’s access to banking services. Critics argue 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 incoming administration has the opportunity to reverse so many poor crypto policy decisions, chief among them politically motivated regulatory decisions like Operation Chokepoint 2.0.”

Paul Grewal via X.