A U.S. federal judge has called out the Federal Deposit Insurance Corporation (FDIC) for overly broad redactions in its “pause letters” sent to banks regarding cryptocurrency activities. These letters, at the center of a Coinbase-supported Freedom of Information Act (FOIA) lawsuit, are now under scrutiny for what some allege is a lack of transparency.
FDIC Ordered to Revise Redactions
On Dec. 12, Washington, D.C., District Court Judge Ana Reyes issued a text order criticizing the FDIC’s handling of the redactions. She noted:
“The Court is concerned with what appears to be FDIC’s lack of good-faith effort in making nuanced redactions.”
Judge Reyes directed the FDIC to revise the redactions and refile the documents by Jan. 3, warning that the agency must be prepared to justify every redaction. She added that it is insufficient to “blanket redact everything that is not an article or preposition.”
What Are the “Pause Letters”?
The letters in question, referred to as “pause letters,” were sent by the FDIC to 23 financial institutions regarding their cryptocurrency-related activities. In some cases, the letters instructed banks to:
- “Pause all crypto asset-related activity.”
- “Refrain from providing” or expanding crypto-related services or products.
However, many pages of these letters were heavily redacted, sparking criticism from Coinbase’s Chief Legal Officer, Paul Grewal.
Criticism of FDIC’s Redactions
Coinbase and others in the crypto industry allege the redactions are part of an effort to obscure the government’s intentions regarding crypto regulations. Paul Grewal voiced his frustration in a Dec. 12 post on X (formerly Twitter):
“What is [the FDIC] working so hard to hide?”
Grewal previously linked the letters to a rumored federal initiative dubbed “Operation Chokepoint 2.0.” This alleged effort by the Biden administration purportedly seeks to restrict the crypto industry’s access to banking services.
“[Operation Chokepoint 2.0] wasn’t just some crypto conspiracy theory,” Grewal wrote on Dec. 6. “The FDIC is still hiding behind way overbroad redactions.”
Implications for the Crypto Industry
The controversy surrounding these letters has amplified concerns about regulatory hostility toward cryptocurrency. The FDIC’s actions, coupled with the heavy-handed redactions, add to fears that federal agencies may be intentionally stifling the crypto industry’s access to financial services.
Judge Reyes’ order to revise the redactions represents a win for transparency advocates, but it remains to be seen how much more detail the revised documents will reveal about the FDIC’s stance and actions toward crypto-related banking.
