US Regulator 'Improperly' Pushing Banks to Avoid Serving Crypto Companies, Lawmaker Says

Sen. Pat Toomey said whistleblowers had informed him the FDIC was pressuring banks to stop providing services to crypto companies.

AccessTimeIconAug 17, 2022 at 6:42 a.m. UTC
Updated May 11, 2023 at 5:09 p.m. UTC

The Federal Deposit Insurance Corporation (FDIC) may be leaning on banks to prevent them from providing services to cryptocurrency companies, U.S. Sen. Pat Toomey (R-Pa.) said Tuesday, citing communications he had received.

In a letter directed to Acting FDIC Director Martin Gruenberg, Toomey wrote that he had heard from "affected parties" and whistleblower communications that claimed the federal bank regulator had tried to "deter banks from doing business with lawful cryptocurrency-related companies," even though providing services to these companies is not illegal. Toomey asked the regulator to confirm whether any FDIC official had indeed asked banks to not do business with crypto firms, and if so, to explain why.

American Banker first reported the letter on Tuesday.

Toomey referenced "Operation Choke Point," a former FDIC and Department of Justice initiative whose stated purpose was to pressure banks not to provide services to payday lenders and financial fraud charges, but which appeared to also pressure banks not to provide services to companies engaging in legal activities like gun sellers.

"According to whistleblower communications that we have corroborated, personnel in the FDIC’s Washington, D.C., headquarters are urging FDIC regional offices to send letters to multiple banks requesting that they refrain from expanding relationships with crypto-related companies, without providing any legal basis for sending such letters," Toomey wrote. "... As I understand it, in one or more of these cases, a bank planned to give customers access to a crypto-related company’s trading platform via the bank’s mobile or internet banking app."

FDIC officials also allegedly directed a regional branch to "downgrade" the classification of a loan made by a bank to a crypto company, which Toomey called "highly atypical."

In a statement, the FDIC said, "The FDIC is acting consistent with longstanding legal authorities to ensure that banks engaging in crypto-related activities are doing so in a safe and sound way that protects consumers. This may involve the FDIC requesting that an institution delay initiating or refrain from expanding crypto-related activities until supervisory feedback is taken into account. Given the risks readily apparent in the crypto-asset markets, these are necessary and appropriate actions to take."

The regulator has published statements before directing banks to be cautious about working with crypto companies.

In April, the FDIC published an open letter addressed to any banks or other institutions it oversees, directing them to contact the FDIC before it engages in "a crypto-related activity." The regulator said it would assess the information provided by the bank to check for "safety and soundness," and provide feedback if needed.

"The information requested by the FDIC will vary on a case-specific basis depending on the type of crypto-related activity. However, the initial notification to the FDIC Regional Director should describe the activity in detail and provide the institution’s proposed timeline for engaging in the activity," the letter said.

The letter is similar to one published by the Federal Reserve this week, which also directs banks under its supervision to contact the central bank prior to engaging in crypto activities.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.