US regulator was cautious on crypto but did not tell banks to choke off sector, documents show
2025.01.03 12:00
By Pete Schroeder and Douglas Gillison
WASHINGTON (Reuters) – A top U.S. bank regulator told multiple lenders to pause dabbling directly in crypto in 2022 and 2023, but did not direct them to stop providing banking services to crypto companies, according to documents released on Friday.
A judge ordered the Federal Deposit Insurance Corporation to provide versions of 25 supervisory “pause letters” it sent to unidentified banks after History Associates Incorporated, a research firm hired by crypto exchange Coinbase (NASDAQ:), sued the agency to release them.
The FDIC first released the letters in December but was ordered by the judge to resubmit them with more “nuanced redactions.”
The litigation is part of a campaign by Coinbase to expose what it and other crypto companies say has been a concerted effort on the part of U.S. bank supervisors to choke off crypto companies from the traditional financial system.
In a bid to combat those claims, the FDIC also on Friday published a 2022 internal memo detailing how supervisors should assess queries from lenders looking to directly deal in crypto assets, versus offering banking services to crypto companies.
Together, the documents provide a rare glimpse into the confidential bank supervisory process. They suggest that while FDIC examiners have been cautious towards the crypto sector, which has been beset by scams, bankruptcies and volatility, they did not order banks to entirely cut off the crypto sector.
The documents are being released weeks before President-elect Donald Trump’s incoming administration is expected to outline a broad crypto policy overhaul. Trump is expected to issue an executive order directing bank regulators to go easier on the sector, potentially as early as his Jan. 20 inauguration.
Several of the FDIC letters show staff directed banks to either pause entering crypto initiatives or refrain from further expanding client crypto services. In others, the FDIC required banks to answer detailed questions before proceeding further with crypto ventures.
The internal memo, meanwhile, distinguishes between a bank engaging directly in crypto activities, like holding crypto assets in custody, and offering traditional banking services for crypto clients, like lending and providing deposit accounts. The first category requires stricter scrutiny, it says.
The memo echoes comments made in December by FDIC Chairman Martin Gruenberg, who told reporters the agency does not “debank” crypto firms in terms of access to bank accounts, but direct crypto engagement by banks is a “subject of supervisory attention.”
“Crypto-related activities may pose significant safety and soundness and consumer protection risks, as well as financial stability concerns,” the memo notes, adding such risks are still “evolving.”
