FDIC Releases Redacted Operation Choke Point 2.0 Letters
The FDIC’s secret letters to banks halting crypto activities, part of "Operation Choke Point 2.0," have been unveiled following a court order. Learn more about the government's alleged anti-crypto agenda.
How the FDIC Secretly Stifled Banks’ Crypto-Related Activities
The Federal Deposit Insurance Corporation (FDIC), originally established to restore trust in the U.S. banking system, quietly released redacted letters it had sent to banks prohibiting them from engaging in any "crypto-related activity." This release follows a June 2024 court order instigated by cryptocurrency exchange Coinbase, which had filed a Freedom of Information Act (FOIA) request through its contractor, History Associates.
These letters, part of what’s informally called "Operation Choke Point 2.0," expose an alleged covert effort to stymie the cryptocurrency industry. Between March 2022 and May 2023, the FDIC issued at least 25 letters to banks, instructing them to:
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"Pause" all crypto-related services.
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"Not implement" crypto-related products.
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"Refrain from expanding" services involving digital assets.
In its March 2022 correspondence, the FDIC noted: “The FDIC has not yet determined what, if any, regulatory filings will be necessary for a bank to engage in this type of activity.”
The Fight for Transparency
Coinbase Chief Legal Officer Paul Grewal revealed the significance of these documents in a social media post, saying: “We finally got the unredacted OCP [Operation Choke Point] 2.0 letters from the FDIC. It took a court order, but you can now read them for yourself below. They show a coordinated effort to stop a wide variety of crypto activity.”
Although the public versions of the letters have redacted the names of financial institutions involved, it is unclear whether Coinbase received unredacted copies.
Key Themes in the FDIC Letters
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Halting Crypto Activities: The regulator pushed banks to cease all crypto-related activities with no specified timeline for resumption.
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Burdensome Requirements: Banks attempting to offer basic crypto services faced extensive paperwork. For instance, a bank wanting to allow customers to buy bitcoin through online banking was subjected to 36 questions over nearly three pages, including a full strategic and marketing plan and an analysis of SEC Staff Accounting Bulletin 121 (SAB 121).
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Confidentiality Clause: Beginning in September 2022, the FDIC letters included a request for confidentiality, stating: “This letter is confidential and may not be disclosed or made public in any manner under part 309 of the FDIC Rules and Regulations.” This policy effectively kept the public unaware of the regulator’s actions.
Regulatory Hurdles
The FDIC’s actions appear to align with SEC SAB 121, an accounting guideline that imposes onerous requirements on banks servicing crypto clients. For example:
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In April 2022, a bank proposing blockchain-based services received a four-and-a-half-page questionnaire covering governance, accounting methods, risk management, and more.
These tactics, combined with the confidentiality clause, have fueled concerns about regulatory overreach and lack of transparency.
Calls for Accountability
Paul Grewal has called for immediate congressional hearings, stating: “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.”
Conclusion
The release of these letters sheds light on the FDIC’s covert measures to limit crypto-related activities within traditional banking. While their rationale remains unclear, the implications for the crypto industry are profound. As the regulatory environment continues to evolve, transparency and accountability will be essential to ensure fair treatment for innovative financial technologies.
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