A cryptocurrency exchange accused the US government of undermining the cryptocurrency sector orchestrating a campaign against digital currencies.

Coinbase revealed that the US Federal Deposit Insurance Corporation (FDIC) has been employing tactics to dissuade financial institutions from engaging in crypto-related activities.

FDIC: Stay Away From Crypto

Coinbase claimed that FDIC had sent letters to several financial establishments to ask them to avoid getting involved in cryptocurrency-related investments.

Coinbase’s Chief Legal Officer Paul Grewal revealed that they’ve found proof of FDIC’s anti-crypto campaign, telling American financial institutions to maintain their hands off digital currency investments.

Source: FDIC Dallas Regional Office

Up to now, Grewal said that that they had come across “greater than 20 examples” of those tactics opposing cryptocurrencies, adding that the US agency told financial institutions to “pause”, “refrain from providing” or “not proceed” with providing banking services for digital assets.

Slowly but surely, the image is becoming clear. After we sued, @FDICgov finally began giving us information related to our FOIA request concerning the pause letters it sent to financial institutions as a part of Operation Chokepoint 2.0. In brief, the contents are a shameful example…

— paulgrewal.eth (@iampaulgrewal) November 1, 2024

“Slowly but surely, the image is becoming clear,” Grewal said in a post as Coinbase began receiving the knowledge from the FDIC for its Freedom of Information Act (FOIA) request regarding the letters sent to banks consistent with the so-called Operation Chokepoint 2.0.

In an earlier interview, US Senator Bill Hagerty said that Operation Choke Point 2.0 is the “coordinated effort” by the federal government’s financial authorities to suffocate the domestic digital currency economy by “de-banking the industry” and deterring American entrepreneurs from having interest in digital assets.

BTCUSD trading at $69,424 on the each day chart: TradingView.com

Coinbase Calls For Transparency

Grewal said the American public should know the reality because they deserve transparency, criticizing FDIC for using such tactics and “working behind a bureaucratic curtain.”

He described the contents of the letters as shameful examples of a state-run agency making an effort to maintain law-abiding American firms away from accessing cryptocurrencies.

A Cloud Of Doubt

Documents submitted to the court showed that FDIC doubts the chance assessments being performed by banks involving bitcoin services, hence the US financial agency told banks to carry off their plans of offering such services until the evaluation is finished.

In considered one of the letters, FDIC Assistant Regional Director Eric T. Guyot asked a certain financial institution to “pause all crypto asset-related activity” to permit the FDIC to look at the protection and soundness of the crypto product the bank planned to supply.

In one other letter dated March 25, 2022, FDIC acting Regional Director Jessica A. Kaemingk persuaded a financial establishment to “rethink” their proposal of rolling out a digital asset product, questioning the planned offering’s “safety and soundness” and urging the bank to submit additional documents.

Financial Regulations

The present battle between Coinbase and FDIC is a component of the continued saga on the true relationship between government regulations and the cryptocurrency space. It would be an added item to the continual debate on easy methods to strike a balance between consumer protection and innovation in cryptocurrency.

Featured image from Banner Health, chart from TradingView