The U.S. Federal Deposit Insurance Corporation (FDIC) directed banks to exercise caution regarding direct involvement in cryptocurrency during 2022 and 2023, but stopped short of ordering them to cease offering banking services to crypto companies. This information comes from documents released on Friday, refuting industry claims of widespread “debanking.”
After a lawsuit from History Associates Incorporated, a research firm retained by crypto exchange Coinbase (COIN.O), a judge compelled the FDIC to produce redacted versions of supervisory “pause letters” sent to unidentified banks. The initial release in December was followed by a court order to provide a more nuanced version. The new batch contains 25 letters, including two additional ones not included in the original FDIC submission.
The litigation stems from Coinbase’s broader campaign to expose what the company and others in the crypto sector contend is an organized effort by U.S. bank supervisors to restrict crypto companies’ access to the traditional financial system. Coinbase’s chief legal officer, Paul Grewel, stated on X (formerly Twitter) that the less redacted letters revealed a “coordinated effort to stop a wide variety of crypto activity” and called for further Congressional investigation.
To counter these claims, the FDIC also released a 2022 internal memo detailing how supervisors should assess inquiries from lenders looking to engage directly in crypto assets, versus offering banking services to crypto companies. These documents offer a rare look into the confidential bank supervisory process. While the FDIC examiners exhibited caution toward the crypto sector, which has been plagued by scams, bankruptcies, and volatility, they did not instruct banks to completely withdraw from the sector.
The documents’ release comes just weeks before the incoming administration of President-elect Donald Trump is anticipated to unveil a comprehensive crypto policy overhaul. Trump is expected to issue an executive order directing bank regulators to ease restrictions on the sector, potentially within days of his inauguration on January 20.
Several FDIC letters instructed banks to either pause the launch of crypto initiatives or refrain from further expanding crypto services to clients. In other cases, the FDIC required banks to provide detailed answers before moving forward with crypto ventures. The internal memo distinguishes between a bank’s direct engagement in crypto activities, such as holding crypto assets in custody, and offering traditional banking services to crypto clients, like providing deposit accounts and loans. The former category necessitates more stringent scrutiny.
The memo echoes comments made in December by FDIC Chairman Martin Gruenberg, who told reporters the agency doesn’t “debank” crypto firms concerning access to bank accounts. However, direct crypto engagement by banks has been a “subject of supervisory attention.” The memo notes that “Crypto-related activities may pose significant safety and soundness and consumer protection risks, as well as financial stability concerns,” but that such risks are still “evolving.”
