Coinbase has released new information about the Federal Deposit Insurance Corporation (FDIC)’s efforts to limit banks’ involvement in cryptocurrency activities.
The revelations have sparked criticism of U.S. regulators and raised new suspicions dubbed “Operation Chokepoint 2.0.”
FDIC Cryptocurrency Guidelines… Similar to Operation Chokepoint
On January 3, Coinbase’s Chief Legal Officer Paul Grewal released additional FDIC letters urging banks to curtail their cryptocurrency-related operations. Grewal said the letters cover everything from Bitcoin trading to advanced cryptocurrency services, and are part of a broader plan to suppress the cryptocurrency industry.
“After the FDIC previously said they were complying with the court order, this search magically uncovered two additional cease-and-desist letters. It’s hard to believe their good intentions when every time we pull on the thread, their sweater seems to get looser. The new Congress should begin hearings on all of this without delay,” Grewal said.
According to the documents, between 2022 and 2023, the FDIC will direct certain banks to suspend cryptocurrency-related offerings until it assesses potential risks and finalizes regulatory guidance. One letter raised concerns about facilitating Bitcoin transactions through third-party partnerships, and recommended that banks suspend such activities while waiting for further guidance.
“The proposed product appears to be a pathway for bank customers to engage in cryptocurrency asset activities, specifically Bitcoin trading, through a third-party contract. However, at this time, the FDIC has not yet determined what regulatory documentation would be required for banks to engage in this type of activity. Accordingly, we urge you to cease all cryptocurrency asset-related activities,” the letter stated .
Ripple’s chief legal officer, Stuart Alderotti, emphasized that these FDIC guidelines appear to be designed to discourage banks from engaging in cryptocurrency-related business. He interpreted the unusual tactic of sending letters directly to bank boards as a move to create a deliberate chilling effect.
“These letters shout one message: immediately cease all cryptocurrency-related activities, not just the products and services mentioned. It is rare and deliberate to send a letter directly to the board. These letters are written to shock the bank,” Alderotti argued .
In fact, Coinbase CEO Brian Armstrong has hinted at further legal action, expressing optimism about judicial intervention to address this regulatory overreach. According to him, the FDIC’s actions are unconstitutional and regulators should enforce existing laws rather than create new ones.
“A regulatory agency is supposed to enforce the law, not try to bypass Congress and make their own laws. The Constitution says only Congress can make laws! So this was essentially unconstitutional and illegal. I look forward to the judge’s decision on this issue,” Armstrong said .
Meanwhile, the FDIC’s move reminded many of “ Operation Chokepoint ,” which indirectly pressured financial institutions. A recent survey found that crypto-focused companies were facing significant banking problems , while other sectors, such as real estate or private lending, did not report such problems.
Attorney John Deaton has volunteered to lead a federal investigation into the situation. He says this wave of regulatory pressure is not just excessive, it represents a direct challenge to free-market principles.
“What is becoming increasingly clear is that Chokepoint 2.0 is not simply 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 said .
