FDIC Releases Trove of ‘Operation Chokepoint 2.0’ Crypto Documents

The Federal Deposit Insurance Corporation unexpectedly released a trove of documents on Wednesday detailing how the agency regulated banks’ approach to crypto.

Travis Hill, the FDICS’s acting chairman, said the agency is taking steps to enhance transparency as lawmakers move to investigate a plot dubbed “Operation Chokepoint 2.0.”

“The documents that we are releasing today show that requests from these banks were almost universally met with resistance,” he said in a press release. “These and other actions sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward.”

In December the FDIC published 24 letters detailing the agency’s push to delay or prevent American banks from engaging in crypto-related activities. But this 790-page batch of documents appears to contain correspondence covering banks’ ability to serve crypto firms as well.

In one letter, an FDIC appointee acknowledged that a bank’s board of directors had chosen to close all of an entity’s deposit accounts. While the entity wasn’t explicitly referred to as a crypto firm, the letter also sought additional information on the bank’s internal authorization “to engage with up to a maximum of three additional crypto companies.”

The letter also said that “banking organizations are neither prohibited nor discouraged from providing banking services to customers of any class or type,” but industry advocates have claimed the correspondence was further proof of the FDIC’s debanking plot.

The documents were unveiled shortly before Senate lawmakers began a scheduled hearing on “debanking.” So far, it’s been giving the public a first look at whether the FDIC unlawfully clamped down on the crypto industry.

Bitcoin and ‘reputation risk’

One snippet, highlighted by Coinbase Chief Legal Officer Paul Grewal, showed how a bank was deterred from offering an account to a stablecoin issuer looking to park reserves at the institution. The bank was told that it “should not proceed with any crypto-asset activity” until the FDIC and another entity—the name is redacted in the document—found the practice was safe and sound.

In one case, Grewal said the FDIC did not raise concerns about “risks to the financial system.” But he did think it deterred a bank from offering a way for customers to purchase Bitcoin. In an excerpt, the FDIC stated that “reputation risk” or the prospect of Bitcoin’s price falling was at issue.

Though the conversation among lawmakers has focused intensely on the FDIC, which insures banking deposits and supervises financial institutions, the Federal Reserve recently weighed in.

A week ago, Fed Chair Powell stated that “banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks.”

Some letters included in Wednesday’s document dump accused banks of false advertising, claiming that they did not include clear and prominent disclaimers that digital assets are not covered by FDIC insurance in advertisements.

On Wednesday, Hill signaled that more documents may be in the pipeline, as the agency moves to reverse practices under the previous administration.

“While this review remains underway, we are releasing a large batch of documents today,” he said. “Looking forward, we are actively reevaluating our supervisory approach to crypto-related activities.”

Edited by Stacy Elliott.