A United States federal judge criticized the Federal Deposit Insurance Corporation (FDIC) for its redactions of crypto “pause letters” sent to banks, amid a Coinbase-backed Freedom of Information Act (FOIA) lawsuit.

“The Court is concerned with what appears to be FDICs lack of good-faith effort in making nuanced redactions,” Washington, DC, District Court Judge Ana Reyes wrote in a Dec. 12 text order.

“Defendant cannot simply blanket redact everything that is not an article or preposition.”

Judge Reyes ordered the FDIC to “make more thoughtful redactions” and re-file letters by Jan. 3, adding the FDIC “should be prepared to defend each new redaction.”

Judge slams FDIC’s ‘lack of good-faith’ in censoring crypto letters to banks image 0

The full text of Judge Reyes’ Dec. 12 order. Source: PACER

The so-called “pause letters” — which in some cases have entire pages censored — show that the FDIC asked 23 financial institutions about their crypto-related activities.

In some of the letters, the FDIC told the firms to “pause all crypto asset-related activity” or otherwise “refrain from providing” or “expanding” seemingly crypto-related products and services.

Judge slams FDIC’s ‘lack of good-faith’ in censoring crypto letters to banks image 1

An excerpt of the FDIC’s filing shows an essentially completely redacted page of a letter sent to a financial firm. Source: CourtListener

“What is [the FDIC] working so hard to hide?” Coinbase legal chief Paul Grewal wrote in a Dec. 12 X post in response to Judge Reyes’ order.

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Earlier this month, Grewal said the letters added credence to a long-shared crypto industry rumor that the Biden administration was trying to cut the crypto industry off from financial services, a policy dubbed “Operation Chokepoint 2.0.”

This “wasn’t just some crypto conspiracy theory,” Grewal posted on X on Dec. 6. “[The FDIC] is still hiding behind way overbroad redactions.”

The same day, The Wall Street Journal reported that Donald Trump’s presidential transition team was asking potential banking regulator appointees if, as president, he could eliminate or combine such agencies, including the FDIC.

Trump’s advisers are also considering overhauls of the Office of the Comptroller of the Currency and the Federal Reserve.

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