The Federal Deposit Insurance Corporation (FDIC) is preparing to revise its guidelines for banks engaging in crypto-related activities, Barrons reported on Feb. 5.
The changes would allow banks to participate in certain crypto-related activities without requiring prior regulatory approval. Some banks have reportedly engaged with government officials to advocate for offering crypto custody services and exploring tokenized deposits as a potential alternative to stablecoins.
These tokenized deposits could integrate checking accounts with blockchain technology, signaling a shift toward adapting banking infrastructure to the evolving digital asset landscape.
New documents related to pause letters
On Feb. 5, the FDIC released 175 documents related to its oversight of banks involved in or seeking to engage in crypto services, highlighting a shift in the agency’s stance.
The documents pertain to the 2022 “pause letters,” which the FDIC sent to 24 financial institutions, advising them to halt or avoid offering crypto-related services.
In a statement, FDIC acting chairman Travis Hill said:
“Our decision to release these documents reflects a commitment to enhance transparency, beyond what is required by the Freedom of Information Act (FOIA), while also attempting to fulfill the spirit of the FOIA request.”
The FOIA request was filed by Coinbase on Oct. 18 and seeks clarity on an alleged 15% deposit cap imposed on crypto-friendly banks. The FDIC complied with the request in December 2024, although the documents were heavily redacted. A less censored version was published on Jan. 3.
Coinbase chief legal officer Paul Grewal said that the regulator retained information because two more letters were included in the uncensored documents.
In a Feb. 5 X post, he reiterated the allegations, claiming that the FDIC was hiding more pause letters.
Resistance by FDIC
Hill assessed that the documents released reveal that requests from banks seeking crypto-related services “were almost universally met with resistance,” as the FDIC repeatedly requested further information and remained silent for months.
He added:
“Both individually and collectively, these and other actions sent the message to banks that it would be extraordinarily difficult — if not impossible — to move forward. As a result, the vast majority of banks simply stopped trying.”
Grewal highlighted pieces of the FDIC-shared documents he thought showed the banks folding under the pressure of the regulator’s threats. He said the FDIC often pressured banks by performing a “regulation by exhaustion.”
This tactic involved sending an initial letter urging the interruption of a crypto-related service and asking for clarification. After the bank answered the FDIC requests, the regulator placed them on hold, prompting the bank to abandon its crypto-related offering.
According to the documents, the FDIC listed BTC volatility, reputational risk, and consumer protection risk as the main reasons behind its decision to pause services.
Caitlin Long, founder and CEO of Custodia Bank, pointed out multiple instances in the released documents, including FDIC officials’ internal chats, where the word “deposit” was mentioned.
According to Long, deposit is a term used to address US dollars-denominated deposits. A piece of one of the internal chats in the documents mentions staying away from crypto deposits, which she assessed as the official saying to avoid receiving deposits from crypto firms.
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