Documents Reveal US Regulators Only Warned Banks About Crypto, Didn’t Issue Hands-Off Order

Recently released documents show that the Federal Deposit Insurance Corporation (FDIC) advised financial institutions to temporarily halt direct involvement in cryptocurrency activities but didn’t mandate the cessation of banking services to crypto firms, contrary to claims of nationwide “debanking” within the industry.

A court had ordered the banking regulator to provide partially redacted copies of supervisory pause notices sent to undisclosed banks. This followed a lawsuit by History Associates Incorporated, a research group hired by Coinbase, demanding the agency release these communications.

Although the FDIC initially released the notices in December, a judge later required additional revisions to make the redactions more specific. The updated set includes 25 letters, with two previously unreleased ones added to the collection.

This legal effort forms part of a broader campaign by Coinbase to highlight what it alleges is a deliberate attempt by U.S. banking regulators to marginalize crypto firms within the conventional financial system. Paul Grewal, the exchange’s chief legal officer, took to X on Friday, asserting that the less-redacted documents reveal a “concerted attempt to limit various crypto activities.” Grewal also urged Congress to look into the matter.

In response to these allegations, the FDIC released an internal memo from 2022 outlining how regulators should evaluate inquiries from banks. The memo distinguished between banks seeking to directly engage with digital assets and those providing standard banking services to crypto-related clients.

The released documents offer a rare look into the often-confidential supervisory processes of banking regulators. While they reveal a cautious stance toward the crypto industry due to its association with bankruptcies, fraud, and market instability, they do not indicate a directive to sever ties with cryptocurrency businesses altogether.

The notices show FDIC officials advising banks to either pause plans to directly engage in cryptocurrency initiatives or limit further expansion of services for crypto clients. In some instances, banks were required to provide detailed answers to specific questions before pursuing crypto-related ventures.

The 2022 memo emphasized that banks engaging directly in cryptocurrency activities, such as custody services for digital assets, face stricter regulatory scrutiny compared to those offering traditional services like loans and deposit accounts to crypto clients.

These revelations come just weeks before Donald Trump’s administration is expected to unveil a comprehensive crypto policy shift. Reports suggest Trump may issue an executive order urging banking regulators to adopt a more lenient approach to the crypto sector, potentially as early as January 20.

Crypto industry actors like Canaan Inc. (NASDAQ: CAN) will be hoping that the campaign rhetoric of the incoming president turns into concrete policies and mechanisms to support the growth of the crypto industry in the U.S.

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