Coinbase Alleges FDIC Told Banks to Halt Crypto Services in Operation “Chokepoint 2.0”

   Crypto exchange Coinbase says that the US Federal Deposit Insurance Corporation (FDIC) sent letters to financial institutions instructing them not to offer crypto banking services. In a series of posts on X (formerly Twitter), Coinbase’s Chief Legal Officer Paul Grewal said that FDIC did this as part of “Operation Chokepoint 2.0” under which it was instructing banks to not engage in crypto offerings. Coinbase made a Freedom of Information (FOI) Request to the FDIC asking for details of the letters. However, when the company didn’t get access to the letters, it sued FDIC and as of November 4, the court approved Coinbase’s demand for the letters. For context, the original operation chokepoint was an initiative by the US Department of Justice in 2013. Under this operation, the US government investigated banks that provided services to fraudsters. Grewal, and others such as crypto exchange Gemini’s co-founder Tyler Wilkenvoss, argue that the government is carrying out a similar initiative with respect to crypto services as well. Grewal says that Coinbase has found 20 instances where FDIC told banks to pause crypto services. Contents of the letters: As per the company’s exhibit in court, the letter exchange between FDIC and banks focused on: details of how crypto projects would work and the technology the crypto project would rely on the number of customers currently using an existing crypto project. FDIC also instructs the concerned bank not to expand this service to other customers prior to regulatory examination of the service. asked banks to notify the FDIC of any changes/expansions to the service questions about a bank’s crypto project to assess its safety and sound manner. While Coinbase doesn’t have full access to the various letters’ contents, Grewal argues that “in short, the contents are a shameful example of a government agency trying to cut off financial access to law-abiding American companies.” He added that regulators need to ensure transparency in their actions instead of “working behind a bureaucratic curtain”.