Documents released Friday provide new insights into the U.S. Federal Deposit Insurance Corporation's (FDIC) strategy for managing the banking sector's involvement with cryptocurrency in 2022 and 2023.

These records, which feature supervisory 'pause letters,' indicate that while the FDIC recommended banks proceed cautiously with cryptocurrencies, it fell short of requiring them to cut all ties with crypto firms.

This revelation contradicts claims from cryptocurrency companies about widespread 'debanking.'

The letters, disclosed under a court order following a lawsuit by History Associates Incorporated on behalf of Coinbase, were initially released in December but have been resubmitted with fewer redactions.

The newest collection includes 25 letters, two more than previously shared.

Coinbase, a vocal critic of U.S. regulatory approaches to the crypto industry, asserts that these communications indicate a coordinated effort to limit crypto firms’ access to conventional financial services.

In a social media post on platform X, Coinbase’s chief legal officer Paul Grewal remarked that the documents suggest a 'coordinated effort to halt various crypto activities.' He urged Congress to conduct further investigations.

### FDIC's Perspective: Caution Without Prohibition

The FDIC letters demonstrate that the regulator advised banks to pause crypto-related initiatives or refrain from expanding services for crypto clients without increased oversight.

The agency also required banks to address detailed inquiries before proceeding with plans involving digital assets.

An internal memo from 2022, issued alongside the letters, further clarifies the FDIC’s position, distinguishing between banks directly involved in crypto activities—such as holding digital assets in custody—and those providing traditional banking services like lending or deposit accounts to crypto companies.

The memo suggests that direct crypto activities warrant greater scrutiny due to risks related to consumer protection, financial stability, and operational soundness.

FDIC Chairman Martin Gruenberg reiterated these views in December, noting that while the agency does not 'debank' crypto firms, direct bank involvement in crypto activities is a regulatory concern.

'Crypto-related activities may present significant safety and soundness, consumer protection, and financial stability risks,' the memo states, noting that these risks are 'evolving.'

### Coinbase’s Advocacy and Larger Context

Coinbase’s legal challenge is part of a broader crypto industry pushback against perceived regulatory overreach.

Industry leaders argue that cautious regulatory guidance has effectively restricted access to traditional banking services, hindering the sector’s development.

The FDIC’s release of these documents, however, emphasizes the agency’s focus on risk management rather than outright prohibition.

The timing of these disclosures is particularly notable.

Incoming President Donald Trump’s administration is anticipated to propose a major overhaul of U.S. crypto policy, with Trump expected to issue an executive order for regulators to adopt a more lenient stance towards the sector.

This policy shift, which could occur as early as Trump’s inauguration on January 20, may significantly reshape the regulatory environment for crypto firms and their banking partners.

### Looking Ahead

The discussion over crypto regulation continues as lawmakers, regulators, and industry stakeholders address the complexities of integrating digital assets into the financial system.

While the FDIC’s documents reveal a cautious approach, they also underline the regulator’s recognition of the sector’s evolving risks.

The release of these materials adds a new dimension to the ongoing conversation on balancing innovation with financial stability and consumer protection.