FDIC Documents Reveal Pressure on Banks to Restrict Cryptocurrency Firms

• FDIC exposed barriers to crypto sector in internal documents.
• Congress investigates “debanking” practices against cryptocurrencies.
• Crypto companies push for regulatory transparency in the US.

The Federal Deposit Insurance Corporation (FDIC) has surprised the market by releasing an extensive set of documents detailing regulatory practices aimed at the cryptocurrency sector. The material, which includes hundreds of pages of internal correspondence, reveals , the Banks have been discouraged from offering services to crypto-related companies, reigniting the debate over the so-called “Operation Chokepoint 2.0”. The disclosure comes at a strategic time, shortly before hearings in the United States Congress that intend to investigate the impact of these policies on crypto companies’ access to the traditional financial system.

We were right. The previous @FDICgov leadership lied to us all. There were many, many more pause letters. We are reviewing now–and so can you (link in thread). THANK YOU ACTING CHAIRMAN HILL. https://t.co/dY5VHQkd3Q

— paulgrewal.eth (@iampaulgrewal) February 5, 2025

The term “Operation Chokepoint 2.0” refers to a series of actions allegedly coordinated by regulators to limit crypto companies’ access to banking services, creating an environment unfavorable to the sector’s growth. The strategy harks back to the original operation, launched in the 2010s, which aimed to restrict financial support to sectors considered high risk, such as weapons and gambling. However, this time, the focus would be on the crypto ecosystem, with banks being pressured to review or end business relationships with these companies.

The documents released show that, although there is no formal ban, regulatory recommendations and guidance have created a climate of uncertainty among financial institutions. In one case highlighted, a bank was instructed to suspend any activity related to crypto assets until the FDIC and another entity, whose name was redacted in the files, deemed the operation safe. In another passage, an institution reported having closed all accounts of a company while seeking authorization to serve up to three clients in the crypto sector, highlighting the level of caution adopted.

Coinbase Chief Legal Officer Paul Grewal has been outspoken on the matter. He noted that while the FDIC has not raised direct concerns about systemic risk, its stance has had a clear chilling effect, driving banks away from potential partnerships with crypto companies. In a recent post, Grewal stated that he is committed to exposing the unfair treatment faced by the industry, thanking the House Financial Services Committee for taking the issue seriously.

The debate over the impact of these regulatory policies isn’t limited to the financial sector’s backrooms. The U.S. Congress is preparing to hold hearings that are expected to shed light on the role of regulators like the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) in creating barriers to the crypto sector. The hearings will feature industry heavyweights including Marathon Digital CEO Fred Thiel and representatives from organizations that advocate for the digital asset ecosystem.

There is a growing consensus among lawmakers that excessive regulatory practices can stifle innovation and push companies into less stringent jurisdictions where oversight is limited. Critics of “Operation Chokepoint 2.0” say the current approach threatens not only the growth of the crypto industry but also the competitiveness of the United States in the global fintech landscape.

Even within the government itself, there are disagreements about how to conduct these policies. Federal Reserve Chairman Jerome Powell recently stated that “banks are perfectly capable of serving crypto customers, as long as they understand and can manage the risks involved.” This statement contrasts with the content of the FDIC documents, suggesting a lack of alignment between the country’s top regulators.

The impact of the release of these documents is likely to be felt in the coming weeks as Congress moves forward with its investigations and the crypto industry seeks to ensure a more transparent and predictable regulatory environment.