Coinbase CLO Exposes FDIC’s Alleged Attempt to Debank Crypto Clients

Whistleblower Reveals FDIC’s Abuse of FOIA Exemption 8

In a recent X post, Coinbase Chief Legal Officer Paul Grewal shed light on the ongoing legal battle between Coinbase and the Federal Deposit Insurance Corporation (FDIC). Grewal alleged that the FDIC abused FOIA exemption 8 to conceal court-compelled information, sparking concerns about the regulator’s intentions.

The FOIA Exemption 8 Controversy

Exemption 8 of the Freedom of Information Act is designed to protect sensitive information related to the regulation or supervision of financial institutions. However, Grewal claims that the FDIC used this exemption to heavily redact documents, known as “pause letters,” without a lawful justification. These letters were sent to financial institutions, urging them to stop providing services to clients associated with cryptocurrency activity.

The “Pause Letters” and Operation Choke Point 2.0

The disclosed letters, sent between 2022 and 2023, reveal that the FDIC instructed banks to halt services for clients involved in various cryptocurrency-related activities, including:

* Bitcoin-backed lending operations
* NFTs and cryptocurrency storage
* Onboarding of decentralized ecosystems
* Products allowing clients to buy or sell cryptocurrencies
* Private and public blockchain settlement networks
* Issuance of permissioned stablecoins
* Stablecoins depositories
* Issuing debit cards with Bitcoin cash back

Grewal alleges that the FDIC’s actions were part of a covert operation, dubbed Operation Choke Point 2.0, aimed at blocking services for law-abiding clients, including those associated with cryptocurrencies, religious groups, and African countries.

Support from Senator John E. Deaton

Senator and former prosecutor John E. Deaton expressed support for the efforts to stop Operation Choke Point 2.0, offering to lead a federal investigation into the matter without salary. Deaton emphasized the significance of the case, warning that the precedent of “unelected bureaucrats… arbitrarily denying access to essential financial infrastructure” goes far beyond the cryptocurrency sector.

Conclusion

The ongoing battle between Coinbase and the FDIC has shed light on the regulator’s alleged attempts to debank crypto clients. As new facts emerge, it remains to be seen whether the FDIC’s actions were an example of caution or outright hostility towards the cryptocurrency industry. One thing is certain – the outcome of this case will have far-reaching implications for the future of cryptocurrency regulation in the United States.

Source: Bitcoinethereumnews.com

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