Federal Deposit Insurance Corporation Bans Banks From Public Blockchain Operations

The Federal Deposit Insurance Corporation has clarified its stance on U.S. banks’ involvement in cryptocurrency, responding to claims of rampant “debanking” in the sector.

While the FDIC did not order banks to stop providing banking services to crypto firms, it asked them to temporarily halt direct participation in crypto business between 2022 and 2023. This was after raising red flags concerning the volatility and other risks related to crypto, including fraud and bankruptcies.

According to Reuters, documents unsealed on Friday as part of a lawsuit filed by Coinbase show the FDIC’s supervisory “pause letters” to unnamed banks.

A judge had earlier ordered the Federal Deposit Insurance Corporation to make public more redacted versions of these letters, now 25 documents—two added to the original batch. Their publication illuminated one of the most contentious issues: the perception by the crypto industry of U.S. regulators’ active efforts to limit access to the traditional financial system.

The chairman of the FDIC, Martin Gruenberg, has said that while the agency closely monitors direct crypto engagement, it does not prohibit crypto firms from holding bank accounts.

Coinbase’s chief legal officer, Paul Grewel, panned the new batch of documents as evidence of a “coordinated effort to stop a wide variety of crypto activity.” He called on Congress for further investigation.

In defence of its actions, the Federal Deposit Insurance Corporation also released a 2022 internal memo detailing how banks should approach crypto-related inquiries. The memo distinguishes between banks that directly hold crypto assets, which merit heightened scrutiny, and those that provide basic banking services such as lending or deposit accounts to crypto clients.