On January 6, 2025, Coinbase’s Chief Legal Officer (CLO), Paul Grewal, took to X to continue discussing the ongoing legal battle with the Federal Deposit Insurance Corporation (FDIC). The FDIC had admitted to sending “pause letters” to banks, urging them to suspend services to clients associated with cryptocurrency.
Grewal accused the FDIC of using a FOIA exemption to withhold key information, including court-compelled documents, in an attempt to cover up such actions.
Coinbase sued the FDIC to enforce the Freedom of Information Act (FOIA) and gain access to documents related to the so-called pause letters, which the agency had initially withheld.
The FDIC invoked FOIA exemption 8 to redact much of the letters, arguing that the full release could damage relations between banks and regulators. The letters, which were sent to various financial institutions from 2022 through 2023, instructed them to immediately cease services for crypto-related clients until further notice.
However, it is not clear if the FDIC’s promised guidance ever came out. Grewal said that the redactions were not justified and hinted that they were meant to hide “Operation Choke Point 2.0,” a coordinated effort by U.S. financial regulators to stop services for crypto clients and other specific groups.
In this context, some believe that the FDIC’s actions were an aggressive push to force banks out of the cryptocurrency space.
In a previous report, pro-XRP attorney John E. Deaton, a vocal critic of Operation Choke Point 2.0, called for an investigation and said such actions could pose a grave problem for the future of this ongoing case.
He said unelected officials could unfairly limit access to crucial financial services. That would harm not only the crypto sector but also other groups, including religious institutions and clients from African countries. The issue has been a recurring theme in wider debates over the future of cryptocurrency and financial regulation.
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, adding to 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 keep raising questions about why the FDIC is acting this way and how it is regulating cryptocurrency.
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