FDIC Reevaluates Approach to Crypto
Commentary by Gage Raju-Salicki
In a public statement, FDIC Acting Chair Travis Hill said the agency is "actively reevaluating our supervisory approach to crypto-related activities."
Mr. Hill criticized the former approach taken by the FDIC which "contributed to a general perception that the agency was closed for business if institutions are interested in anything related to blockchain or distributed ledger technology."
He said he: (i) "directed staff to conduct a comprehensive review of all supervisory communications with banks that sought to offer crypto-related products or services;" and (ii) released correspondence with a large number of banks purportedly showing that "requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity."
Further, Mr. Hill stated that the agency intends to replace "Financial Institution Letter (FIL) 16-2022 ("Notification of Engaging in Crypto-Related Activities") and provid[e] a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles."
Commentary
The newly released tranche of documents is related to litigation between research firm History Associates Inc., and the FDIC over a Freedom of Information Act request. History Associates alleged that the "FDIC had sent letters (the 'pause letters') to an undisclosed number of supervised financial institutions asking them to pause crypto-related activities—indefinitely." Terming this activity "Operation Choke Point 2.0," History Associates sought to compel the FDIC to comply with FOIA and provide those pause letters sent to banks.
As Acting Chair Hill notes, the FDIC previously released some of the aforementioned pause letters. In one such letter, the FDIC stated that it "plans to perform a detailed review of this activity," and that a crypto-asset-related service therefore "should not [be] expand[ed]." These letters, in effect, confirmed what History Associates and many in the cryptocurrency industry had suspected. To that end, Judge Ana C. Reyes ordered further production of "any other pause letters" by February 7, 2025—which led to Mr. Hill's latest action. The production of this correspondence now answers the general thrust of History Associates' prayer for relief—leaving open the question of what follows from the FOIA litigation.
Beyond the production of this court-ordered correspondence, the Acting Chair said that the agency intends to replace previous guidance and "provid[e] a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles."
Any bank that is interested in engaging in crypto activities should consider moving promptly to obtain permission to do so now that the FDIC has indicated its willingness to grant permission. There may be a range of crypto activities where there is an advantage to any bank that is an early mover.
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