FDIC Letters Reveal Banks Told to Pause Crypto Activity Until Review: What’s Really Behind the Delay?

• The FDIC played an integral role in cutting crypto firms off banking support, as per recently released letters.
• Coinbase plays a crucial role in exposing the FDIC amid the quest for wholesome crypto regulations.

There are currently heightened discussions surrounding the US crypto regulatory landscape following the release of several FDIC letters to banks. The 25 unredacted letters issued to Coinbase Exchange shed light on the FDIC’s efforts to restrict the banking services available to crypto businesses.

FDIC Restricts Banks’ Crypto Activities

The released FDIC letters requested that banks temporarily halt crypto-related activities until further review of compliance and risk factors. In some letters, the FDIC required banks to answer detailed questions before proceeding with crypto ventures.

Fox Business Journalist Eleanor Terret highlighted that some FDIC letters were written nearly two or three years ago. She questioned if the Federal Deposit Insurance Corporation (FDIC) withheld the letters to slow down crypto integration with the banking sector. 

Eleanor wrote,

Was the FDIC hiding behind these letters and alleged review periods as a way to slow-walk any integration of digital assets into the legacy banking system?

Given the FDIC’s restrictions on banks, she brought up a key development in the crypto industry. Eleanor emphasized that little to nothing has changed regarding banks’ ability to hold or provide crypto-related products in the last two to three years. 

The 25 unredacted letters show the @FDICgov telling banks not to implement certain #crypto products, refrain from expanding them and, in some cases, pause all crypto-related activity altogether until “reviews are completed,” “questions answered,” and determinations reached about… https://t.co/HqibdtLzMd

— Eleanor Terrett (@EleanorTerrett) January 3, 2025

Her comment implies that the FDIC’s restriction has decreased the banking industry’s use of digital assets. “Meanwhile, regulatory clarity has remained opaque at best,” Eleanor added. 

Despite the current uncertainty in the US crypto market, Eleanor looks to see what happens in the next three years under a new administration. Notably, the new government under Donald Trump has repeatedly pledged support for crypto and blockchain technology.

Trump is anticipated to sign an executive order instructing banking regulators to ease off on the sector, possibly on his January 20 inauguration.

Expose’ on the FDIC Letters

Meanwhile, Eleanor’s comments on the FDIC letters are in response to a post from Coinbase’s Chief Legal Officer (CLO) Paul Grewal. Taking to X, the CLO said the FDIC letters demonstrate a coordinated attempt to halt a wide range of crypto activity, ranging from simple Bitcoin (BTC) transactions to more complicated offerings.

It is important the FDIC provided versions of 25 supervisory “pause letters” after History Associates Incorporated, a research firm hired by Coinbase, sued the agency to release them. The FDIC initially disclosed the letters in December, but a Judge ordered the agency to resubmit them with “nuanced redactions.”

The litigation is part of Coinbase’s and other crypto companies’ campaign to expose U.S. bank supervisors. They claim US bank regulators have made concerted efforts to isolate crypto companies from the traditional financial system.

In response to these claims, the FDIC issued a 2022 internal memo on Friday. The documents provide a rare glimpse into the confidential bank supervisory process. It also suggests that the FDIC did not order banks to cut off the crypto sector entirely.