KEY POINTS
- A March letter revealed that the FDIC asked member banks to 'pause all crypto-asset related activity'
- One letter showed that a bank was already offering a certain Bitcoin service to some 2,800 clients
- Coinbase's Paul Grewal called for a Congress hearing to assess if the FDIC was acting in 'good faith'
- Crypto experts and enthusiasts are criticizing the FDIC for 'gaslighting' banks who want to adopt crypto
Letters obtained and revealed to the public by cryptocurrency exchange giant Coinbase revealed that the Federal Deposit Insurance Corporation (FDIC) discouraged member banks to engage in public blockchains, and for Coinbase, this is proof that Operation Choke Point 2.0 (OCP 2.0) during the Biden administration existed.
Coinbase Chief Legal Officer Paul Grewal took to X over the weekend to reveal that the company obtained two more "unredacted OCP 2.0 letters from the FDIC."
"They show a coordinated effort to stop a wide variety of crypto activity – everything from basic BTC (Bitcoin) transactions to more complex offerings," he said in a series of posts.
We finally got the unredacted OCP 2.0 letters from @FDICgov. It took a Court order but you can now read them for yourself below. They show a coordinated effort to stop a wide variety of crypto activity — everything from basic BTC transactions to more complex offerings. 1/3
— paulgrewal.eth (@iampaulgrewal) January 3, 2025
What the Letters Reveal
Coinbase already obtained heavily redacted versions of 23 letters through the Freedom of Information Act (FOIA) last month, but on Friday, the crypto exchange obtained two new ones that have been almost entirely unredacted, showing the extent of the FDIC's supposed efforts to keep banks from utilizing blockchain technology.
- BTC activity – One letter dated March 11, 2022 showed that the FDIC told members of the board it has yet to determine whether regulatory filings are necessary for banks to engage in activity around Bitcoin transactions. Thus, it "respectfully" asked members to "pause all crypto asset-related activity."
- Bitcoin service – In a letter dated Apr. 5, 2022, the FDIC told board members about a Bitcoin service from a certain bank that was already catering to around 2,800 customers. It said a review will take place first but until it is completed, the bank "should not expand the service to additional customers."
- Other digital assets – A letter dated June 22, 2022 showed that the FDIC told board members a bank submitted an application "to engage in digital asset activities," but the FDIC said it still has questions regarding the activities.
There were other letters that had similar requests and concerns from the FDIC sent between 2022 and early 2023. It is unclear whether there were other letters sent last year to member banks.
Some of the letters had more specific aspects of crypto and Bitcoin that banks were apparently exploring but the FDIC wanted more reviews or asked for a pause in, including Bitcoin-linked payment cards and other BTC activity in banking mobile apps.
Grewal Calls for Congress Hearings
Following the revelation that the FDIC "magically found two more pause letters" in relation to the court order for the release of the documents, Grewal said Congress should initiate a hearing as soon as possible to determine whether the FDIC was acting "in good faith."
Coinbase and a growing number of crypto executives have said the government under outgoing President Joe Biden worked with financial regulators to "de-bank" crypto companies and leaders in a coordinated effort allegedly dubbed Operation Choke Point 2.0.
'Crypto Twitter' Reacts to Big Reveal
Crypto users on X, often referred to as "Crypto Twitter," reacted wildly to the release of the two new unredacted documents, mostly fuming over how the FDIC supposedly tried to "block" traditional financial institutions from adopting Bitcoin and other blockchain-based assets.
Chris O, a well-known figure in the space, especially in the Cardano community, the revelation should be a catalyst for a class-action lawsuit against the Biden government.
Time for a class action lawsuit against the Biden Administration on behalf of US crypto companies and investors. @brian_armstrong
— Chris O 🌎 Cardano DRep (@TheOCcryptobro) January 3, 2025
Digital currency policy advisor Tanvi Ratna said the FDIC's "reluctance" to provide full transparency without a court order raises serious concerns about "regulatory accountability," something the U.S. Securities and Exchange Commission (SEC) under outgoing Chair Gary Gensler has also been criticized for.
FDIC's reluctance to provide full transparency without a FOIA court order raises serious concerns about regulatory accountability.
— Tanvi Ratna (@tanvi_ratna) January 4, 2025
Beside asking a Congress inquiry on this, how should the crypto community respond to ensure innovation-friendly policies ahead?@brian_armstrong
One user blasted the FDIC for the "incredible level of gaslighting" employed in its supposed bid to stop banks from serving crypto users.
Prominent crypto enthusiast Nic Carter said that the letters show how OCP 2.0 is "not a conspiracy theory," but actually happened in real life.
So in summary, we now have it on record that between 2022 and 2023 the FDIC sent out at least 25 letters asking banks to indefinitely pause or curtail:
— nic carter (@nic__carter) January 4, 2025
- Bitcoin and ethereum buy/sell products for bank clients
- private blockchain settlement networks
- public blockchain…
Former Massachusetts senatorial candidate John Deaton said that if the FDIC's actions "go unchallenged," it will establish a dangerous precedent for regulatory agencies and bodies to "quietly suppress entire industries they disfavor, stifling innovation, competition, and economic opportunity."
As a former prosecutor and Special Assistant United States Attorney I am very serious about volunteering to help lead a federal investigation into ChokePoint 2.0. I would accept the task without salary. The American people deserve the truth a hell of a lot more than I or anyone… https://t.co/LFdhpCixnr
— John E Deaton (@JohnEDeaton1) January 4, 2025
It remains to be seen how the case will push through and whether Coinbase's legal fight in relation to OCP 2.0 will reveal more details not just about the alleged operation but also about the growing desire of traditional financial providers to adopt crypto.
