FDIC Documents Reveal Crypto “Pause Letters” Amid Claims of Sector Debanking

In newly released documents, the Federal Deposit Insurance Corporation (FDIC) disclosed that while it directed banks to pause direct involvement in cryptocurrency activities in 2022 and 2023, it did not mandate the termination of banking services to crypto companies. This revelation contradicts widespread complaints within the cryptocurrency industry of so-called “debanking.”

The documents, made public as part of a court order, include supervisory “pause letters” sent by the FDIC to unnamed banks. The release follows litigation initiated by History Associates Incorporated, a research firm employed by cryptocurrency exchange Coinbase, seeking transparency around the FDIC’s actions.

A judge overseeing the case ordered the FDIC to release more detailed versions of the letters, which were initially disclosed in December. The updated set of 25 letters includes two additional communications previously withheld from the initial submission.

The lawsuit is part of a broader campaign by Coinbase to highlight what it alleges is a deliberate effort by US banking regulators to isolate cryptocurrency companies from the traditional financial system. Paul Grewel, Coinbase’s chief legal officer, took to X (formerly Twitter) to comment on the revelations. “The less redacted letters show a ‘coordinated effort to stop a wide variety of crypto activity,’” Grewel wrote, urging Congress to launch further investigations.

In its defense, the FDIC also published a 2022 internal memo that outlines the framework supervisors should use when evaluating banks’ inquiries about dealing with crypto assets or providing services to cryptocurrency companies. The memo, along with the letters, offers an uncommon look into the confidential processes of bank supervision.

While the documents underscore caution from FDIC examiners regarding the crypto sector—citing risks such as fraud, market volatility, and bankruptcies—they also suggest that regulators stopped short of demanding an outright cutoff of services to the crypto industry.

Some of the released letters reveal FDIC staff instructed banks to pause their involvement in crypto initiatives or avoid expanding client services tied to cryptocurrency. Other letters required banks to provide detailed responses to inquiries before proceeding further with crypto-related ventures.

The FDIC memo draws a clear distinction between two types of activities: banks directly engaging in crypto-related operations, such as custodial services for crypto assets, and banks providing traditional banking services to crypto firms, such as loans or deposit accounts. The memo states that the former requires a higher level of scrutiny.

FDIC Chairman Martin Gruenberg reinforced this position in remarks to reporters in December, stating, “The agency does not ‘debank’ crypto firms in terms of access to bank accounts, but direct crypto engagement by banks is a ‘subject of supervisory attention.’”

The memo emphasizes that “crypto-related activities may pose significant safety and soundness and consumer protection risks, as well as financial stability concerns.” It also notes that these risks remain “evolving.”

The release of these documents comes just weeks before the incoming administration of President-elect Donald Trump is expected to unveil a major overhaul of US crypto policy. Trump is reportedly preparing an executive order to direct banking regulators to take a more lenient approach toward the cryptocurrency industry, with an announcement expected shortly after his January 20 inauguration.

By fLEXI tEAM