- Coinbase accused the FDIC of redacting documents to conceal anti-crypto measures.
- Operation Choke Point 2.0 raises concerns regarding funding transparency.
Coinbase Chief Legal Officer Paul Grewal said the Federal Deposit Insurance Corporation has hidden its actions against crypto-friendly banks. On January 6, 2025, Grewal criticized the FDIC on X (formerly Twitter) for using Freedom of Information Act Exemption 8 to withhold essential details from court-ordered disclosures. This criticism followed Coinbase’s successful push for the agency to produce public records. The records revealed that the FDIC had sent “pause letters” to banks, instructing them to stop servicing cryptocurrency clients.
The government established FOIA Exemption 8 to protect private and confidential information from financial institutions, such as operating reports and examination results. However, Coinbase claims that the FDIC uses this exemption for the opposite purpose and hides its role in crypto banking prohibition. Grewal said that the FDIC only released additional documents when compelled legally and redacted most of them without a valid legal ground for redaction.
The FDIC pushed back on these claims, stating that releasing the names of affected banks and business information could cause foreseeable harm to the banks and their relationship with regulators. Even the pause letters mailed to banks contained confidentiality markings, which remained in effect until September 2022. This indicates an effort by all parties involved to maintain confidentiality in their communications. Documents released on January 4 show that redactions may be part of an effort to conceal information about “Operation Choke Point 2.0.” These actions suggest a deliberate attempt to keep certain details under wraps.
Controversy Over FDIC’s Redactions
Operation Choke Point 2.0 refers to the supposed efforts of the regulatory bodies, including the FDIC and Federal Reserve, to deny banking services to industries like cryptocurrency and religious organizations. Critics say that such moves limit access to financial infrastructure and transparency and have broader implications for financial freedom.
Former prosecutor and Senator John E. Deaton vowed to investigate the officials behind Operation Choke Point 2.0. He stated that this could set a bad precedent for financial regulation. Critics argue that such steps restrict access to financial infrastructure and transparency and have wider implications for financial freedom.
According to Grewal, the larger issue is the FDIC’s ongoing effort to de-bank lawful entities, particularly crypto companies. He warns that this effort will have severe implications for the future of crypto banking. Additionally, it could negatively impact financial transparency more broadly.
The issue began in 2022 when Coinbase CEO Brian Armstrong submitted a FOIA request to obtain copies of the pause letters issued by the FDIC. After finding too much redacted information in the responses, Coinbase filed a lawsuit in court. To support its efforts for greater transparency, Coinbase hired History Associates to continue the legal battle.
The lawsuit continues to reflect tensions between U.S. regulators and the cryptocurrency industry, with transparency being a central issue, as is fair treatment.
