The US banking regulator instructed banks in 2022 and 2023 to stop directly participating in cryptocurrencies, but did not order them to stop providing banking services to cryptocurrency companies, according to documents released on Friday.
The Federal Deposit Insurance Corporation (FDIC) unveiled supervisory “pause letters” following a lawsuit filed by History Associates Incorporated, a research firm hired by cryptocurrency exchange Coinbase.
A judge ordered the FDIC to resubmit the letters with more precise redactions after the agency’s initial release in December. The updated set includes 25 letters, two more than the original.
Coinbase, as part of a campaign to highlight alleged discrimination against cryptocurrency companies, said these documents reveal regulators’ efforts to isolate cryptocurrency companies from traditional banking services.
Paul Grewal, chief legal officer at Coinbase, commented on In an effort to address these allegations, the Federal Deposit Insurance Corporation (FDIC) issued a 2022 internal memo detailing supervisory guidelines for banks exploring cryptocurrency projects.
Newly released documents reveal the FDIC’s cautious stance toward the volatile cryptocurrency industry, but stopped short of asking banks to cut ties with the sector entirely. Some letters direct banks to temporarily halt or limit their cryptocurrency-related activities, while others request comprehensive answers from banks before allowing cryptocurrency-related expansions.
The internal memo highlights the differences between direct involvement in cryptocurrencies, such as custodial services, and traditional banking services such as deposits or loans to cryptocurrency companies. Stricter scrutiny applies to the former, while the latter remains permissible with oversight.
FDIC Chairman Martin Gruenberg previously stated that the agency does not “break up” cryptocurrency companies but monitors banks’ direct involvement in cryptocurrency activities as part of its supervisory responsibilities. The memo also notes that cryptocurrency-related activities pose safety, soundness and financial stability risks, which “continue to evolve.”
These developments come ahead of President-elect Donald Trump’s expected policy reform, which could include an executive order easing restrictions on cryptocurrency-related banking as early as January 20.