Coinbase has disclosed fresh information about efforts by the Federal Deposit Insurance Corporation (FDIC) to limit banks’ participation in cryptocurrency activities.
The revelations have ignited criticism against the US regulator and fueled allegations of a renewed “Operation Chokepoint 2.0.”
FDIC’s Crypto Directives Draw Parallels to Operation Chokepoint
On January 3, Coinbase’s Chief Legal Officer, Paul Grewal, revealed additional FDIC letters urging banks to scale back their crypto-related operations. Grewal stated that these letters, covering everything from Bitcoin transactions to advanced crypto services, are part of a broader initiative to suppress the crypto industry.
“Note that FDIC magically found TWO more pause letters in this search after saying before that it had complied with an earlier Court order. It’s hard to believe in their good faith when their sweater further unravels every time we pull on the thread. The new Congress should launch hearings on all this without delay,” Grewal remarked.
Documents reveal that between 2022 and 2023, the FDIC instructed certain banks to halt any crypto-related offerings until the agency could evaluate potential risks and finalize regulatory guidelines. One letter specifically raised concerns about Bitcoin transactions facilitated through third-party partnerships, advising banks to pause such activities while awaiting further guidance.
“The proposed product is apparently an avenue for bank customers to engage in crypto asset activity, specifically Bitcoin transactions, through a third-party arrangement. However, at this time the FDIC has not yet determined what, if any, regulatory filings will be necessary for a bank to engage in this type of activity. As a result, we respectfully ask that you pause all crypto asset-related activity,” the letter stated.
Ripple’s Chief Legal Officer, Stuart Alderoty, emphasized that these FDIC directives seem designed to deter banks from engaging in any crypto-related business. He highlighted the unusual tactic of addressing bank boards directly, interpreting it as an intentional move to create a chilling effect.
“These letters scream one message: shut down everything crypto-related ASAP — not just the products and services mentioned. Writing directly to the Board is a rare and deliberate step. These letters are crafted to send shockwaves through the bank,” Alderoty claimed.
Indeed, Coinbase CEO Brian Armstrong has hinted at further legal action, expressing optimism about judicial intervention to address these regulatory overreaches. According to him, the FDIC actions are unconstitutional and regulatory agencies should enforce existing laws rather than attempt to create new ones.
“Regulators should be enforcing the law, not trying to bypass congress and create their own laws. The constitution says only congress shall make the laws! So de facto these actions were unconstitutional and illegal. I look forward to a judge weighing in on this,” Armstrong said.
Meanwhile, the FDIC’s moves have reminded many of “Operation Chokepoint,” a program that targeted certain industries through indirect pressure on financial institutions. A recent survey revealed that crypto-focused firms face significant banking challenges, unlike other sectors such as real estate or private credit, which report no comparable issues.
Attorney John Deaton has volunteered to lead a federal investigation into this situation. According to him, this wave of regulatory pressure goes beyond overreach and represents a direct challenge to free-market principles.
“What’s becoming increasingly clear is that ChokePoint 2.0 isn’t just about isolated regulatory overreach. It represents a direct assault on the principles of American free market capitalism. At its core, our economic system thrives on open competition, innovation, and equal opportunity – not on regulators quietly picking winners and losers behind closed doors,” Deaton stated.
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