FDIC Holds Back "Freeze Documents" According to Claims by Coinbase
In a recent development, the Federal Deposit Insurance Corporation (FDIC) is facing scrutiny for allegedly withholding crucial documents related to its regulatory actions towards cryptocurrency businesses. This controversy revolves around the "pause letters" sent by the FDIC to banks, urging them to suspend certain crypto-related activities from March 2022 to May 2023.
The allegations stem from a lawsuit filed against Coinbase in 2023, accusing the crypto exchange of operating as an unregistered securities exchange, broker, and clearing agency. In the course of this lawsuit, Coinbase has sought access to internal FDIC communications, including the "pause letters," which would provide evidence of the FDIC's efforts to impose restrictions on the banking sector's engagement with cryptocurrency businesses like Coinbase.
The consulting firm, History Associates, claims that the FDIC is not fully disclosing all such letters, potentially withholding further evidence crucial to the case. Coinbase's chief legal officer, Paul Grewal, has stated that they are interested in all "pause letters" ever handled by the FDIC's Office of Inspector General.
Senator Cynthia Lummis of Wyoming has threatened the FDIC with potential criminal charges if it has indeed destroyed any documents related to crypto oversight. This comes as part of a broader tension between crypto industry participants seeking regulatory clarity and documents, and federal regulators managing oversight responsibilities amid evolving digital asset challenges.
The FDIC, however, argues that it is acting within its regulatory and supervisory role. It has released some documents related to its supervision of crypto-related activities but has not publicly acknowledged improper withholding. The FDIC likely views the withholding of some documents as part of a legal process balancing transparency with regulatory confidentiality.
As of January 17, 2025, no further updates regarding the resolution of this issue have been provided. This dispute reflects ongoing tensions between the crypto industry and federal regulators, as both parties navigate the complex landscape of digital assets.
In June 2024, Coinbase sued both the SEC and FDIC, accusing them of attempting to "cut the crypto industry off" from banking. The FDIC's actions are being addressed in a federal court, and History Associates plans to amend its lawsuit with new allegations regarding the FDIC's conduct.
[2] Source: Federal Register [3] Source: Coinbase Legal Blog
- The controversy surrounding the FDIC's handling of "pause letters" related to crypto-related activities has sparked debates within the realm of technology and finance, as Coinbase's Chief Legal Officer, Paul Grewal, has expressed interest in all such letters ever handled by the FDIC's Office of Inspector General.
- In a series of legal battles, Coinbase has accused both the SEC and FDIC, in a lawsuit filed in June 2024, of attempting to restrict the crypto industry's engagement with the traditional banking sector, thereby impacting the business and technology sectors significantly.
