On February 5, 2025, the Federal Deposit Insurance Corporation (FDIC) made public a significant trove of 175 documents that detail the agency’s communications during the Biden administration. This release comes ahead of a Senate Banking Committee hearing led by Republican members, focusing on the controversial practice of debanking within the cryptocurrency sector. The documents shed light on what has been termed “Operation Choke Point 2.0,” which has raised alarms regarding the treatment of crypto-related businesses by regulatory bodies.
### FDIC’s Shift in Strategy
The FDIC underwent a change in leadership following the inauguration of Donald Trump, with a pro-cryptocurrency team taking charge. This new leadership sided with Coinbase in its efforts to combat the alleged systematic exclusion of crypto businesses from banking services. In a notable legal action in 2024, Coinbase filed a lawsuit against the FDIC, leveraging the Freedom of Information Act to compel the agency to disclose its communications with banks. The resulting documents, which were heavily redacted, became known as the “pause letters” and revealed that the FDIC was urging banks to halt operations with cryptocurrency firms, effectively removing their access to essential banking services without sufficient justification.
### New Documents Highlight Concerns
The latest batch of FDIC documents was released after a review by the new chair, Travis Hill, and coincided with the start of the Senate hearing entitled “Investigating the Real Impacts of Debanking in America.” These documents appear to provide further evidence of the FDIC’s attempts to limit banking access for cryptocurrency businesses during the Biden administration. The information reveals that the FDIC continued to pressure financial institutions to terminate relationships with crypto clients, often ignoring banks’ inquiries or concerns for extended periods. In some instances, the agency directed banks to suspend any blockchain-related activities altogether.
### Coinbase’s Legal Battle and Public Response
Paul Grewal, Chief Legal Officer at Coinbase, has been vocal about the agency’s actions, taking to social media to share excerpts from the documents. He characterized the FDIC’s tactics as “regulation by exhaustion,” implying that the agency’s strategy was to wear down banks’ willingness to engage with crypto clients. The documents reveal that when banks entered agreements that restricted services to crypto businesses, the FDIC actively sought to nullify these agreements to impose broader constraints. Despite banks’ arguments highlighting the safety and legitimacy of crypto transactions, the FDIC consistently maintained its stance against these financial relationships.
### Political Consensus on Debanking Issues
Interestingly, during the February 5 hearing, both Democratic and Republican members expressed concern over the issues surrounding debanking, indicating a bipartisan acknowledgment of unfair practices based on political motivations. In a surprising turn, Senator Elizabeth Warren, typically viewed as an opponent of cryptocurrencies, called for an investigation into the unjust debanking practices. In her correspondence to President Trump, she expressed a willingness to collaborate with him and other congressional leaders to tackle the issue. Warren’s findings indicated that thousands of unfair debanking instances occurred over three years, with a significant number of complaints linked to major banks such as Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup.
### Future Implications for the FDIC and Crypto
The evolving relationship between the FDIC and cryptocurrency is poised for change, particularly following the bipartisan backlash against previous debanking efforts. With the FDIC now aligning more closely with Coinbase, the aggressive tactics of the past may be curtailed. Travis Hill has indicated that the FDIC intends to “reevaluate [their] supervisory approach to crypto-related activities,” which includes plans to replace the Financial Institution Letter (FIL) 16-2022. This letter currently mandates that FDIC-supervised institutions report their engagement with cryptocurrency activities, often leading to the cessation of banking services for crypto clients. Moving forward, the FDIC aims to collaborate with the President’s Working Group on Digital Asset Markets while still adhering to principles of safety and soundness.
