US regulators warned banks about cryptocurrencies, but did not order a halt to business, documents showed

Written by Pete Schroeder and Douglas Jellison

WASHINGTON (Reuters) – The U.S. banking regulator has asked banks to stop working directly in cryptocurrencies in 2022 and 2023, but has not ordered them to stop providing banking services to cryptocurrency companies, contradicting industry complaints of widespread “bank unbundling.” Broad, according to documents posted on the website. Friday.

A judge has ordered the Federal Deposit Insurance Corporation to provide copies of supervisory “pause letters” it sent to unidentified banks after History Associates Incorporated, a research firm hired by cryptocurrency exchange Coinbase, sued the agency to release them.

The FDIC first released the letters in December, but a judge ordered them to be resubmitted with more “careful redactions.” The new batch of 25 letters includes two additional letters sent to unspecified banks that were not included in the original FDIC submission.

The lawsuit is part of a campaign by Coinbase to expose what it and other cryptocurrency companies say is a concerted effort by U.S. bank supervisors to strangle cryptocurrency companies from the traditional financial system.

Paul Greuel, chief legal officer at Coinbase, said in a post on Friday

In an effort to combat these claims, the FDIC also on Friday published a 2022 internal memo detailing how supervisors should evaluate inquiries from lenders looking to deal directly in cryptocurrency assets, versus providing banking services to cryptocurrency companies.

Together, the documents provide a rare glimpse into the secretive banking supervision process. They point out that although FDIC examiners have been cautious toward the cryptocurrency sector, which is plagued by fraud, bankruptcies, and volatility, they have not ordered banks to cut off the cryptocurrency sector entirely.

The documents are being released weeks before President-elect Donald Trump’s new administration is expected to outline a wide-ranging cryptocurrency policy overhaul. Trump is expected to issue an executive order directing bank regulators to make it easier to do business with the sector, perhaps as early as his inauguration on January 20.

Several FDIC letters show that staff directed banks to either temporarily stop engaging in cryptocurrency initiatives or refrain from expanding crypto services to customers. In other cases, the FDIC has required banks to answer detailed questions before moving forward with cryptocurrency projects.

Meanwhile, the internal memo distinguishes between a bank that is directly involved in cryptocurrency activities, such as holding cryptocurrency assets, and providing traditional banking services to cryptocurrency clients, such as lending and providing deposit accounts. The first category requires more stringent scrutiny, she says.

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