WASHINGTON – A U.S. bank regulator, the Federal Deposit Insurance Corporation (FDIC), told banks to pause dabbling directly in crypto in 2022 and 2023, but did not order them to stop providing banking services to crypto companies, according to documents released on Friday.
The documents, including 25 “pause letters” sent to unidentified banks, reveal a more nuanced approach to the crypto sector than previously reported. While FDIC examiners have been cautious towards the sector, which has been plagued by scams, bankruptcies and volatility, they did not order banks to entirely cut off the crypto sector.
The documents were released as part of a lawsuit by Coinbase, a crypto exchange, against the FDIC to expose what it claims is a concerted effort by U.S. bank supervisors to choke off crypto companies from the traditional financial system.
The FDIC also published a 2022 internal memo detailing how supervisors should assess queries from lenders looking to directly deal in crypto assets, versus offering banking services to crypto companies. The memo distinguishes between a bank engaging directly in crypto activities, like holding crypto assets in custody, and offering traditional banking services for crypto clients, like lending and providing deposit accounts.
The memo notes that direct crypto engagement by banks requires stricter scrutiny, citing risks to safety and soundness, consumer protection, and financial stability. However, it also acknowledges that these risks are still evolving.
The release of the documents comes weeks before President-elect Donald Trump is expected to outline a broad crypto policy overhaul, which could include an executive order directing bank regulators to go easier on the sector.
