Coinbase Accuses FDIC of Hiding 'Operation Choke Point 2.0' in Crypto Legal Battle

Coinbase’s CLO Paul Grewal continued discussing the legal battle with the Federal Deposit Insurance Corporation (FDIC) on X, highlighting the agency’s attempt to use a FOIA exemption to withhold key information.

The FDIC had sent “pause letters” to banks, urging them to halt services to clients associated with cryptocurrency. In response, Coinbase sued the FDIC to gain access to documents related to these letters, which the agency had initially withheld.

The FDIC invoked FOIA exemption 8 to redact portions of the letters, claiming that full release could damage relations between banks and regulators. However, Grewal disputed this claim, suggesting that the redactions were intended to conceal “Operation Choke Point 2.0.” This effort by U.S. financial regulators aimed to stop services for crypto clients and other specific groups.

Some parties believe that the FDIC’s actions were an aggressive attempt to force banks out of the cryptocurrency space. Pro-XRP attorney John E. Deaton, who strongly opposes Operation Choke Point 2.0, called for an investigation into the matter.

According to Deaton, such actions could pose a serious problem for the future of the ongoing case. He emphasized the danger of unelected officials unfairly limiting access to crucial financial services, which would harm not only the crypto sector but also other groups.

The “pause letters” in question were directives sent by the FDIC to financial institutions, instructing them to stop providing services to crypto-related clients. The letters warned banks to hold off on these services pending further guidance from the FDIC, but it remains unclear whether such advice was ever issued. Notably, these letters were not initially considered confidential until September 2022, raising concerns about the FDIC’s increasing secrecy.

Even with the letters being partly hidden, some new information was released on January 4, 2025, that did not seem to back up the FDIC’s claims about possible harm from sharing information. These events continue to highlight questions about the FDIC’s actions and its regulation of cryptocurrency.