In a significant development, Eleanor Terrett, a journalist with FOX Business, recently disclosed that Coinbase has unveiled 23 “pause letters” received from the Federal Deposit Insurance Corporation (FDIC). This disclosure comes as a result of Coinbase initiating legal action against the agency to access documents linked to what the crypto sector has termed “Operation Chokepoint 2.0.”
A Conspiracy Theory?
The term “Operation Chokepoint 2.0” encapsulates the belief within the crypto community that regulatory bodies are intentionally hindering industries they consider unreliable by cutting their access to the banking system. The communications released by Coinbase highlight the ongoing ambiguity in regulations, which has escalated tensions between crypto enterprises and federal banking authorities.
The letters, sent in 2022, contained requests from the FDIC for institutions to “pause all crypto asset-related activity,” citing uncertainties in the regulatory landscape surrounding digital assets. These communications have sparked debates, with Coinbase’s Chief Legal Officer, Paul Grewal, affirming that the letters underscore that Operation Chokepoint 2.0 is not merely a conspiracy theory.
Challenges Faced By Crypto Companies
Operation Chokepoint 2.0 is perceived as an effort by the U.S. government to pressure banks into severing ties with crypto companies. This initiative mirrors the original Operation Chokepoint from 2013 to 2017, which targeted payday lenders and other high-risk activities. As of November, several high-profile executives within the crypto sector reported that banks had informed them of impending account closures due to their affiliations with digital assets.
For years, crypto companies have navigated a complex landscape in securing U.S. banking partnerships. The absence of clear guidance from federal regulators has fostered concerns about regulatory compliance, fraud risks, and potential reputational damage. This has led to a cautious approach from banks, limiting the crypto industry’s access to mainstream financial services.
Coinbase’s executives emphasize that the lack of formal guidelines for the crypto industry has allowed regulators to enforce informal restrictions, effectively isolating the sector. The recently released FDIC letters have intensified calls for transparency and clearer regulatory frameworks.
Ongoing Efforts for Clarity and Transparency
Paul Grewal has acknowledged the persistence of Coinbase’s team in pursuing Freedom of Information Act (FOIA) requests, despite facing FDIC denials, appeals, and even a federal lawsuit. He reiterated the commitment to advocating for clarity and transparency from the government, including obtaining unredacted versions of the letters.
Grewal stated, “Law-abiding American businesses should be able to access banking services without government interference. The incoming administration has the opportunity to reverse numerous poor crypto policy decisions, particularly politically motivated regulatory measures like Operation Chokepoint 2.0.”
Looking Ahead
The release of these “pause letters” marks a pivotal moment for the crypto industry, shedding light on the challenges and regulatory uncertainties it faces. As the dialogue between crypto companies and regulatory bodies continues, the industry’s future hinges on the establishment of clear guidelines that foster innovation while ensuring compliance and security.
