Coinbase lawsuit reveals government agencies told banks to stop trading cryptocurrencies
Documents obtained through a disclosure request revealed that U.S. regulatory authorities have issued instructions to financial institutions to restrict cryptocurrency transactions. The lawyer who requested the disclosure argued that 'the pressure from government agencies on the cryptocurrency industry was not just a conspiracy theory.'
As Bitcoin tops $100k analysts prepare for volatility and fears correction
US FDIC Told US Banks to Lay Off Crypto, Letters Obtained by Coinbase Reveal
https://www.coindesk.com/policy/2024/12/05/us-regulator-told-banks-to-lay-off-crypto-letters-obtained-by-coinbase-reveal
Coinbase's top lawyer says Operation Chokepoint 2.0 is 'no conspiracy theory' — and he has the proof – DL News
https://www.dlnews.com/articles/regulation/coinbase-lawyer-says-debanking-is-no-conspiracy-theory/
The case began with a lawsuit filed by Coinbase, a cryptocurrency trading platform. In June 2024, Coinbase sued the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC), alleging that the agencies had unfairly refused to disclose documents that should have been available under the law.
Coinbase has asked the SEC to release documents related to which cryptocurrencies it has determined to be eligible securities, and the FDIC to release documents the agency's inspector general allegedly sent to financial companies instructing them to put the brakes on cryptocurrency trading.
As a result of the legal battle, Coinbase won access to the FDIC documents, with most of the documents redacted. The documents revealed that the FDIC had instructed the government to put the brakes on cryptocurrency transactions, and the story that had been talked about as a conspiracy theory in the cryptocurrency community that 'the government was trying to pressure financial institutions to cut ties with cryptocurrencies' suddenly began to look more real.
According to Coinbase Chief Legal Officer Paul Grewal, the FDIC's letters to financial institutions included 'respectfully requesting that you suspend all cryptocurrency-related activity' and asking them not to proceed with approving accounts until applicants provided revenue projections.
There have long been rumors among those involved in virtual currencies that 'Operation Choke Point 2.0' is an operation by government agencies to pressure financial institutions, but Grewal argues that this document shows that 'Operation Choke Point 2.0 is not just speculation or conspiracy theory.'
Re: the letters that show Operation Chokepoint 2.0 wasn't just some crypto conspiracy theory.
@FDICgov is still hiding behind way overbroad redactions. And they still haven't produced more than a fraction of them. But we finally got the pause letters: https://t.co/Me41BXpbdF … — paulgrewal.eth (@iampaulgrewal) December 6, 2024
Crypto News, a cryptocurrency news site, points out that 'For years, cryptocurrency companies have struggled to maintain relationships with financial institutions due to vague or overly cautious guidelines from regulators.' In the absence of clear rules, financial institutions have been hesitant to partner with cryptocurrency companies due to concerns about the risk of fraud and potential reputational damage, so cryptocurrency companies have been faced with a mountain of major operational challenges.
Regarding this situation, Coinbase executives argued that 'the lack of rules allows regulators to impose arbitrary restrictions, effectively isolating the cryptocurrency industry from mainstream financial services.'
The documents released this time show that the FDIC has been asking financial institutions complex questions about cryptocurrencies, which has often delayed approvals or caused financial institutions to abandon their plans because of the time it took for the FDIC to respond. Crypto News states that 'the contents of the documents appear to highlight an effort to isolate the cryptocurrency industry.'
Meanwhile, news site DL News points out that 'the FDIC's directive appears to be guidance for financial institutions. It is standard practice for the FDIC and other regulators to send risk guidance to lenders as part of their efforts to protect depositors. Lenders are licensed institutions and have a duty of prudence when it comes to providing banking services. And given the fact that cryptocurrencies have long been considered a high-risk area, with a history of fraud and money laundering, it is possible that bank regulators may ask for special measures to be taken,' expressing the view that it is natural for the FDIC to order the brakes on cryptocurrency transactions.
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