A U.S. federal judge has criticized the Federal Deposit Insurance Corporation (FDIC) for its extensive redactions of so-called “pause letters” sent to banks regarding crypto-related activities.
The criticism came as part of a Freedom of Information Act (FOIA) lawsuit backed by Coinbase, Paul Grewal, the Chief Legal Officer of the exchange, revealed in a recent post on X.
Judge Says FDIC Appears to Lack Good-Faith Effort
In a December 12 text order, Washington, DC, District Court Judge Ana Reyes expressed her concerns, stating that the FDIC appeared to lack a “good-faith effort” in its approach to redactions.
“Defendant cannot simply blanket redact everything that is not an article or preposition,” Judge Reyes wrote, calling for “more thoughtful redactions” and instructing the FDIC to refile the letters by January 3.
The judge also warned that the FDIC should be ready to justify each redaction.
The “pause letters” have sparked controversy in the crypto industry.
The letters, which in some cases have entire pages redacted, were sent to 23 financial institutions, urging them to halt or avoid expanding their crypto-related services and products.
“What is [the FDIC] working so hard to hide?” Grewal said, arguing that the letters supported the long-standing belief in the crypto industry that the Biden administration was attempting to sever crypto’s access to financial services — a strategy referred to as “Operation Chokepoint 2.0.”
He previously called out the FDIC for using “way overbroad redactions” in the letters.
We appreciate the Court's careful consideration. What is @FDICgov working so hard to hide? 3/3
— paulgrewal.eth (@iampaulgrewal) December 12, 2024
The controversy surrounding the FDIC’s handling of the letters is set against a broader backdrop of potential regulatory shake-ups.
The Wall Street Journal reported that Donald Trump’s presidential transition team had discussed merging or eliminating regulatory agencies like the FDIC.
His advisors are also considering changes to the Office of the Comptroller of the Currency and the Federal Reserve.
Coinbase to Shift Toward More Revenue Streams Under Trump
Last month, Tom Duff Gordon, Coinbase’s Vice President of International Policy, said the exchange aims to shift toward more predictable revenue streams, such as stablecoin fees, staking rewards, and subscription services under Trump.
“We want to build an earnings profile that isn’t entirely dependent on market volatility,” he explained.
As Trump prepares to take office, the expectation of reduced regulatory friction offers hope for U.S.-based exchanges like Coinbase.
Gordon reiterated the company’s commitment to the American market, stating, “The U.S. will continue to be our most important market.
The cryptocurrency sector has become a significant player in political financing during the 2024 election cycle, with industry-funded PACs raising a total of $190 million.
The Winklevoss twins, Cameron and Tyler, stand out as the largest individual donors, having contributed a combined $10.1 million.
Other significant contributors from the cryptocurrency industry include Coinbase CEO Brian Armstrong, who has given over $1.3 million to both Republican and Democratic PACs.
As reported, Coinbase has also announced a $25 million donation to the super political action committee Fairshake, aiming to bolster support for pro-crypto candidates in the upcoming 2026 midterm elections.
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