Did FDIC Send ‘Pause Letters’ to Freeze Crypto Banking? Coinbase Lawsuit Raises Questions
Coinbase’s Chief Legal Officer Paul Grewal says the Federal Deposit Insurance Corporation (FDIC) is being opaque in its dealings with crypto friendly banks.
On January 6, 2025, Grewal posted on X (formerly Twitter) that the FDIC used FOIA Exemption 8 to black out important information from court ordered disclosures. This was after Coinbase filed a lawsuit to get the documents and they showed the FDIC sent “pause letters” to banks telling them to stop serving crypto clients.
| Broker | Review | Regulators | Min Deposit | Website | |
|---|---|---|---|---|---|
| 🥇 |  | Read Review | FCA, CySEC, ASIC, MAS, FSA, EFSA, DFSA, CFTC | USD 100 | Visit Broker |
| 🥈 |  | Read Review | FSCA, FSC, ASIC, CySEC, DFSA | USD 5 | Visit Broker |
| 🥉 |  | Read Review | CySEC, MISA, FSCA | USD 25 | Visit Broker |
| 4 |  | Read Review | ASIC, BaFin, CMA, CySEC, DFSA, FCA, SCB | USD 200 | Visit Broker |
| 5 |  | Read Review | ASIC, FCA, CySEC, SCB | USD 100 | Visit Broker |
| 6 |  | Read Review | FCA, FSCA, FSC, CMA | USD 200 | Visit Broker |
| 7 |  | Read Review | BVI FSC | USD 1 | Visit Broker |
| 8 |  | Read Review | CBCS, CySEC, FCA, FSA, FSC, FSCA, CMA | USD 10 | Visit Broker |
| 9 |  | Read Review | ASIC, CySEC, FSCA, CMA | USD 100 | Visit Broker |
| 10 |  | Read Review | IFSC, FSCA, ASIC, CySEC | USD 1 | Visit Broker |
FOIA Exemption 8 is meant to protect sensitive information about financial institutions like operating reports or examination results. But Coinbase says the FDIC is using this exemption to hide its role in stifling crypto banking. Grewal noted the FDIC only produced more documents after being forced to and heavily redacted them with no legal basis.
Why Did the FDIC Redact Its Disclosures?
The FDIC said disclosing the names of the banks and operational details would cause “foreseeable harm” to the banks. The redactions would preserve the relationships between the banks and regulators.
Interesting, the “pause letters” were not marked confidential until September 2022 when the FDIC started including language in the letters to banks to keep the communications secret. New documents released on January 4 show the redactions were unnecessary and may have been part of a broader effort to hide Operation Choke Point 2.0.
Here are the key points:
- Tell banks to pause services for crypto clients.
- Limited or delayed responses to regulatory questions.
- No clear explanations to affected customers, often just “unusual activity”.
Implications of Operation Choke Point 2.0
Operation Choke Point 2.0 refers to the alleged efforts by the FDIC, Federal Reserve and other agencies to deny banking services to clients associated with cryptocurrencies, religious organizations and other lawful but disfavored activities. Coinbase and others say these actions restrict financial access and transparency.
Former prosecutor and Senator John E. Deaton says he will investigate the officials involved in Operation Choke Point 2.0. Deaton noted the implications go beyond crypto, saying unelected regulators cutting off access to financial infrastructure is a dangerous precedent.
Grewal said the bigger picture is the FDIC is trying to debank lawful entities. As this case plays out this could have big implications for financial regulation and transparency and for the future of crypto banking.
ABOUT THE AUTHOR
See More
Add 3442
Related Posts
Add 3440
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals
Top Broker