The Federal Deposit Insurance Corporation (FDIC) has clarified its position on banks’ involvement with cryptocurrency, revealing that while it advised caution in 2022 and 2023, it did not impose an outright ban on providing banking services to crypto companies. This clarification comes as part of a series of supervisory “pause letters” released following a lawsuit by History Associates Incorporated, a research firm retained by crypto exchange Coinbase.
The lawsuit led to a federal judge ordering the FDIC to revise its initial December release of documents, which included 23 letters. The newly updated release contains 25 letters, with fewer redactions, shedding more light on the agency’s approach to overseeing crypto-related banking activities.
Coinbase, in its campaign to highlight what it perceives as regulatory discrimination against crypto firms, has pointed to these documents as evidence of efforts by regulators to marginalize the cryptocurrency industry. Paul Grewal, Coinbase’s Chief Legal Officer, stated on X (formerly Twitter) that the less redacted letters reveal a “coordinated effort to stop a wide variety of crypto activity.” He called on Congress to investigate these claims further.
The FDIC has maintained that its supervisory actions are aimed at ensuring financial stability and safety. While the agency advised banks to temporarily pause or limit certain crypto-related activities, it did not prohibit traditional banking services like deposits and loans for crypto companies. Instead, stricter scrutiny was applied to direct crypto dealings, such as custody services and token issuance.
An internal FDIC memo from 2022, released as part of the document trove, outlines the regulatory distinctions between direct and indirect crypto-related activities. It emphasizes the need for banks to demonstrate robust risk management practices when engaging in crypto ventures. The memo also highlights the evolving risks posed by the volatile cryptocurrency market to financial stability and institutional soundness.
FDIC Chairman Martin Gruenberg has reiterated that the agency does not engage in “debanking” of crypto firms. Instead, its supervisory actions are focused on safeguarding the financial system from potential risks associated with the nascent crypto sector. The memo underscores the agency’s role in monitoring banks’ direct involvement in cryptocurrency, while permitting traditional banking services with appropriate oversight.
These developments arrive amid expectations of a significant policy shift with President-elect Donald Trump’s administration set to take office. Reports suggest that an executive order easing restrictions on crypto-related banking activities could be announced as early as January 20, signaling a potential pivot in federal policy toward the cryptocurrency industry.
The FDIC’s approach reflects a cautious balancing act—mitigating risks associated with the fast-evolving crypto sector while allowing for its integration into traditional financial systems under strict regulatory scrutiny. As the regulatory landscape continues to evolve, banks and crypto companies alike will closely monitor the implications of these supervisory actions and potential policy changes under the incoming administration.