According to the Fed, the Federal Deposit Insurance Corporation (FDIC) should stop conducting excessive redactions of documents that Coinbase Crypto Exchange has requested under the Freedom of Information Act (FOIA).
Judge Ana C. Reyes reprimanded the FDIC on Dec. 12 for failing to comply with a court order and accused the agency of not having good faith in what it provided to the court. After complaints from Coinbase, the FDIC redacted too much from its response to Coinbase’s FOIA request for details about alleged federal actions targeting the crypto industry, leading to the ruling.
JUST IN: Judge Reyes ruled that FDIC didn’t do what it was ordered to do. “The Court is concerned with what appears to be FDICs lack of good-faith effort in making nuanced redactions. Defendant cannot simply blanket redact everything that is not an article or preposition.” 1/3 https://t.co/AX5HCKjrij
— paulgrewal.eth (@iampaulgrewal) December 12, 2024
Coinbase’s Chief Legal Officer Paul Grewal revealed the development on the social media platform X (previously Twitter), as he stated that FDIC’s actions imply that the bank might have something to withhold, which deals with the cryptocurrency sector.
In November of 2021 – banks began receiving instructions from the current administration to disengage from any crypto services.. even went on to “debank” targeted customers / businesses. https://t.co/4HrCMMJVTX pic.twitter.com/fGHngO5FFv
— Chad Steingraber (@ChadSteingraber) November 1, 2024
FDIC Documents Highlight Operation Choke Point 2.0
Coinbase’s legal fight is all part of a broader industry push to address concerns over what executives have dubbed ‘Operation Choke Point 2.0.’ The terminology refers to said federal edicts ordering financial institutions to end business dealings with crypto businesses.
According to tweets from prominent crypto figures, including executives from Custodia Bank and Andreessen Horowitz, U.S. regulators are allegedly behind a campaign to debunk blockchain startups and tech innovators.
The documents, made public recently by the FDIC, appear to support these claims, with federal agencies being shown to have pressured banks to deny access to certain crypto companies. The revelation has also validated longstanding suspicions within the industry that the systematic suppression of digital asset firms has occurred.
The FDIC’s murky ways have compounded the burdens the cryptocurrency industry has complained about for years, such a lack of regulatory clarity in the U.S. “I’m not sure we need federal agencies to guard oxen, to tell us how to use the oxen that we do have at our disposal,” businesses have said, complaining that agency oversight has been unclear and unchecked, stifling innovation and restricting transparency.
Coinbase and other crypto firms have taken legal steps to coerce federal agencies into disclosing their activities. This comes as the industry ramps up for fairer treatment in an era of shifting political dynamics.
Donald Trump’s recent electoral victory could start throwing the cryptocurrency regulatory landscape into a tailspin. As new leadership takes over at key financial agencies under the former president, the new leadership may introduce some more crypto-friendly policies.
FDIC Chair Martin Gruenberg and SEC Chair Gary Gensler had already stood down. Gensler made his mark at the SEC by targeting several contentious enforcement actions against several crypto firms. West’s replacement, pro-crypto advocate Paul Atkin, has generated optimism in his sector.
Brian Quintenz, head of crypto policy at Andreessen Horowitz and a former federal regulator, is reportedly being considered for heading the Commodity Futures Trading Commission (CFTC).
The Coinbase FOIA case could have implications for greater transparency surrounding American financial oversight more broadly if the FDIC’s compliance with court orders in the case is regarded as a precedent of greater regulatory transparency and responsibility. Still, the crypto industry presses ahead with its effort for more concrete rules and an end to what it sees as illegal federal meddling.
