Documents recently unveiled indicate that the Federal Deposit Insurance Corporation (FDIC) may be exerting a discouraging influence on American banks interested in integrating services based on public blockchain technologies. This revelation emerged following the release of certain documents, previously heavily redacted, obtained by Coinbase, a major cryptocurrency exchange based in San Francisco, through the Freedom of Information Act.
The unveiling, driven by a court’s mandate, brought to light the details contained within twenty-three documents—augmented by two additional letters—discussing the FDIC’s communications with its member banks regarding cryptocurrencies. One particular correspondence from March 2022 highlighted the FDIC’s apprehensions about a bank’s initiative to introduce a “Bank Digital Deposit” program reliant on a public blockchain, the specifics of which remain undisclosed.
The regulator’s primary concern appeared to stem from the selected use of a public, as opposed to a private, permissioned blockchain network. Public blockchains, such as Ethereum and Solana, are decentralized and allow transparent and non-restrictive participation, contrasting sharply with private blockchains that restrict access and usage, often employed by nations for digital currency initiatives.
The FDIC’s stance underscores a cautious or even skeptical approach towards the banks’ engagement with open, decentralized networks. The March 2022 letter emphasized the requirement for a comprehensive review process before the member bank could proceed with its proposed digital deposit program on a public blockchain.
Further disclosures indicated the FDIC’s directives to banks, urging a halt on the implementation of services linked to Bitcoin trading, inclusive of a broader mandate to “pause all crypto asset-related activity.” These advisories reflect a concerted regulatory scrutiny over banking activities related to cryptocurrencies.
Amidst these developments, Paul Grewal, Coinbase’s Chief Legal Officer, emphasized the significance of these documents. He construed them as evidence of what he described as “Operation Chokepoint 2.0,” purportedly an initiative by the Biden administration to indirectly target the cryptocurrency industry through banking regulations. This term metaphorically nods to an Obama-era policy aimed at curbing businesses deemed as high-risk, including firearms dealers and payday lenders.
Grewal’s remarks, shared on the social media platform X (formerly known as Twitter), denounced the perceived coordinated governmental efforts to inhibit a broad spectrum of cryptocurrency engagements, highlighting a contentious backdrop of regulatory and industry friction over the burgeoning digital assets sector.