Coinbase Reveals FDIC ‘Pause Letters’ Exposing Operation Chokepoint 2.0’s Impact on Crypto

Notably, the name refers to what many players in the crypto industry allege has been a deliberate effort by regulators to stifle industries they deem untrustworthy by cutting off their access to the banking system. These communications, brought to light by Coinbase, spotlight how regulatory ambiguity has fueled tension between crypto firms and federal banking authorities.

According to the letters sent in 2022, the FDIC requested the institutions “pause all crypto asset-related activity” in response to the uncertain regulations around digital assets.

A Conspiracy Theory?

“The FDIC will notify all FDIC-supervised banks at a later date when a determination has been made on the supervisory expectations for engaging in a crypto asset-related activity, including the need for any regulatory filings,” some of the letters read. 

Coinbase CLO Paul Grewal noted “the letters that show Operation Chokepoint 2.0 wasn't just some crypto conspiracy theory. FDICgov is still hiding behind way overbroad redactions. And they still haven't produced more than a fraction of them,” he noted. 

Grewal shared that he is proud of the team’s efforts in pursuing FOIA requests, despite FDIC denials, appeals, and a federal lawsuit. He underscored that they will continue pushing for clarity and transparency from the government, including unredacted versions of letters.

“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,” he underscored. 

Challenges Faced By Crypto Companies

Operation Chokepoint 2.0, a term used by the crypto industry, suggests that the US government is pressuring banks to cut ties with crypto companies. The original initiative, from 2013 to 2017, targeted payday lenders and high-risk activities. In November, high-profile executives from crypto firms claimed that banks informed them their accounts would be closed in 2023 due to their digital assets ties.

For years, crypto companies have faced challenges in U.S. banking partnerships due to unclear federal regulators' guidance, concerns about regulatory compliance, fraud risks, and potential reputational damage, leading to reluctance from banks.

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

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