FDIC's Crypto Crackdown: Chokepoint 2.0?
FDIC Documents Reveal Pressure on Crypto Banking
Newly released Federal Deposit Insurance Corporation (FDIC) documents reveal significant pressure on banks to curtail their involvement with cryptocurrency. This has led to accusations of a 'Chokepoint 2.0' scenario, echoing previous controversies around restricting access to financial services for specific industries.
Key Findings
- Pressure on Banks: The FDIC pressured numerous banks to limit or cease crypto-related services.
- Pause Letters Issued: At least 24 “pause letters” were issued, halting or significantly reducing banks' crypto activities. These letters often cited vague "safety and soundness" concerns.
- Direct Intervention: The FDIC directly intervened in banks’ relationships with crypto companies, even directing banks to restrict US dollar deposit accounts for crypto firms.
- Unprecedented Action: In at least one instance, the FDIC forced a bank to reimburse customers for Bitcoin price losses, despite the bank's program not being designed to assume such risks. This highlights a willingness to enforce measures considered by some as regulatory overreach.
Caitlin Long, CEO of CustodiaBank, a prominent voice in the crypto space, highlighted these findings on Twitter, calling attention to the FDIC's actions and their potential implications for the industry.
The timing of this document release coincides with the appointment of Scott Bessent to the FDIC board, raising questions about potential connections, although his direct involvement remains unconfirmed. The release also follows recommendations from the FDIC Office of Inspector General’s report on managing crypto risks, suggesting a broader, strategic effort to limit crypto's integration with traditional finance.
This situation underscores the ongoing tension between crypto companies and regulators. The actions by the FDIC are seen by some as a renewed attempt to hinder the growth of the crypto industry through controlling access to traditional banking services. Coinbase's recent request to US banking regulators to allow banks to offer crypto custody and trading services further emphasizes the pressing need for clearer regulatory frameworks and increased banking access within the cryptocurrency sector.
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