Regulation
FDIC Releases Docs on Crypto Debanking Ahead Of Chokepoint 2.0 Hearing
The Federal Deposit Insurance Corporation (FDIC) has released 175 documents related to its supervision of banks involved in crypto activities. The release comes ahead of a court-ordered deadline and coincides with the upcoming congressional hearing on banking practices and financial access.
FDIC Released 175 Documents on Crypto Debanking
According to a recent press statement, the FDIC has made public 175 documents detailing its supervision of banks that engaged in or sought to engage in crypto-related activities. The documents reveal patterns of resistance from regulators, with banks facing extended delays, repeated requests for additional information, and directives to pause or refrain from expanding blockchain and crypto-related operations.
The release follows a court-ordered deadline set for Friday. Acting FDIC Chairman Travis Hill stated that the decision to disclose these documents will increase transparency. The move is also aimed at exceeding the requirements of the Freedom of Information Act (FOIA).
The FDIC had previously disclosed 25 “pause” letters sent to 24 institutions interested in blockchain and crypto-related ventures.
However, the newly released documents include additional correspondence with these institutions, along with communications involving other banks not previously identified.
Travis Hill commented,
“The documents that we are releasing today show 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.”
Congressional Hearing Set to Address Banking Practices
The document release comes just before a scheduled congressional hearing on banking practices and financial access. The hearing is expected to focus on concerns over the FDIC’s previous supervisory approach to crypto-related activities, as well as broader issues surrounding regulatory scrutiny of financial institutions.
Acting Chairman Hill noted that the documents demonstrate a regulatory environment that made it increasingly difficult for banks to proceed with digital asset initiatives. The disclosures indicate that the vast majority of institutions ultimately halted their crypto-related activities due to regulatory obstacles.
Senator Cynthia Lummis Applauds Transparency Move
Following the release, Senator Cynthia Lummis commended the FDIC’s move, emphasizing the importance of government transparency. In a statement, she expressed appreciation for Acting Chairman Hill and the administration for making the documents available to the public.
Senator Lummis also declared an end to what she referred to as “Chokepoint 2.0,” efforts to limit banking access for businesses in the crypto sector.
I am thrilled the FDIC acted swiftly & efficiently to release these documents. I want thank Chairman Hill and @POTUS for your commitment to government transparency! We are putting an END to Chokepoint 2.0.
— Senator Cynthia Lummis (@SenLummis) February 5, 2025
Earlier on, pro-crypto Senator Cynthia Lummis warned former Chair Marty Gruenberg against obstructing Senate oversight. She demanded the FDIC preserve all documents tied to OCP 2.0. Lummis also cautioned against retaliation toward whistleblowers, citing potential criminal referrals.
Plans to Revise Crypto Supervisory Approach
In response to concerns raised by the documents, the FDIC has announced plans to reassess its approach to crypto-related activities. This includes replacing Financial Institution Letter (FIL) 16-2022, a guidance document that is restrictive in engaging with blockchain technology.
The FDIC also intends to collaborate with the President’s Working Group on Digital Asset Markets, established by a recent executive order. The agency will develop a regulatory framework that allows institutions to engage in crypto-related activities while adhering to safety principles.
The Federal Deposit Insurance Corporation, under the previous administration, received a lot of criticism for its alleged anti-crypto actions. Coinbase CLO Paul Grewal accused the agency of trying to “kill BTC transactions” and suppress blockchain technology. He claimed FDIC officials hid key evidence in the FOIA case and misused Exemption 8 to cover their tracks.
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The U.S. Securities and Exchange Commission (SEC) has reassigned one of its top crypto litigators, Jorge Tenreiro, to its IT department. This move follows recent changes in the agency’s stance on cryptocurrency regulation under the leadership of Acting Chairman Mark Uyeda.
The decision has drawn attention from legal experts and crypto investors, especially in light of ongoing cases like the XRP lawsuit and the SEC’s recent shift in its approach to digital assets.
Jorge Tenreiro’s Role in Crypto Litigation
According to an X post, Jorge Tenreiro has played a key role in the SEC’s legal actions against crypto firms, including major exchanges and token issuers. He was actively involved in multiple lawsuits and was instrumental in shaping the agency’s legal stance on cryptocurrency.
Tenreiro was also a central figure in the XRP lawsuit, where the SEC accused Ripple Labs of selling XRP as an unregistered security.
His reassignment signals a major shift in the SEC’s enforcement strategy. Along with Tenreiro, another lawyer who contributed to strict crypto accounting guidelines was also moved to a different role.
US SEC’s Changing Stance on Crypto Cases
Under previous leadership, the US SEC pursued crypto firms through enforcement actions, often without clear regulatory guidelines. However, with President Donald Trump’s administration prioritizing a more balanced approach, the SEC has started reconsidering its regulatory framework.
The agency recently decided not to oppose Coinbase’s motion for an interlocutory appeal in its ongoing legal battle.
This shift has led experts to believe that the XRP lawsuit and other crypto cases could be reassessed in the coming months. Pro-crypto attorney James Murphy noted that the SEC may choose to settle or dismiss certain cases instead of continuing its previous enforcement-heavy approach.
Will XRP Lawsuit See An End Soon?
The XRP lawsuit has been one of the most closely watched legal battles in the crypto industry. Ripple has consistently argued that XRP is not a security, while the US SEC has maintained its stance that the token falls under securities regulations.
With Tenreiro’s reassignment and the agency’s evolving approach, some legal analysts believe the XRP lawsuit could see a resolution sooner than expected.
The SEC has not yet issued an official statement on the future of the XRP lawsuit, but recent developments suggest that a settlement or dismissal may be possible. The shift in leadership and strategy indicates that the agency may be moving toward clearer regulations instead of relying solely on legal battles.
Crypto Industry Reacts to SEC’s Changes
The crypto industry has welcomed the SEC’s recent moves, viewing them as a step toward regulatory clarity. The establishment of a dedicated crypto task force and the introduction of a public contact email signals a new approach to digital assets.
Meanwhile, discussions in Congress about potential crypto legislation continue. U.S. “crypto and artificial intelligence (AI)” czar David Sacks recently stated that new crypto laws could be passed within the next six months.
A bill proposed by Senator Bill Hagerty aims to create a clear regulatory framework for stablecoins, ensuring they are backed by assets such as U.S. currency or Treasury bills.
Kelvin Munene Murithi
Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
- Kraken has appointed former Global General Counsel as legal chief
- The exchange recently gained an EU MiFID license for regulated trading
- With the new legal chief, Kraken aims to navigate US regulatory challenges
Kraken has appointed Ben Gray, former Global General Counsel at Paxos, as its new Chief Legal Officer.
The news comes a day after securing a Markets in Financial Instruments Directive (MiFID) license.
This strategic move comes as the cryptocurrency exchange aims to navigate the increasingly complex regulatory landscape while expanding its offerings in the European market.
A timely appointment
Kraken’s decision to bring Gray on board is seen as a significant step towards strengthening its legal and compliance framework.
Gray’s deep experience in the cryptocurrency sector, particularly from his tenure at Paxos where he managed legal, compliance, and enterprise risk, positions him perfectly to lead Kraken through its current regulatory challenges.
His background also includes working with Binance, showcasing his versatility in handling the multifaceted legal issues within the crypto industry.
The timing of Gray’s appointment could not be more critical. Kraken has been under scrutiny from regulators, notably from the US Securities and Exchange Commission (SEC), which accused the exchange of operating as an unregistered securities platform.
With this legal battle in the backdrop, Gray’s leadership in legal affairs is expected to be instrumental in navigating these challenges. His role will encompass overseeing Kraken’s legal strategy, ensuring compliance, and managing enterprise risks, all of which are vital for the company’s operations both in the US and abroad.
In the official announcement of the appointment of Gray, Kraken’s co-CEO Arjun Sethi expressed enthusiasm about Gray’s addition to the leadership team, emphasizing his role in scaling the business and fighting for regulatory clarity.
Sethi’s comments reflect a broader vision where Kraken not only seeks to expand its geographical footprint, but also aims to set industry standards for security, innovation, and compliance. This vision is particularly relevant in Europe, where Kraken sees substantial growth potential and where regulatory compliance can act as a competitive edge.
- Bybit has been fined $1.06M for PMLA non-compliance.
- India blocked Bybit sites pausing the exchange operations in the country.
- Bybit is seeking a VDASP license amid compliance confusion.
India’s financial watchdog has levied a hefty fine of $1.06 million (9.27 crore rupees) on Bybit, one of the world’s largest crypto exchanges, for failing to adhere to the country’s stringent anti-money laundering regulations.
While this move underscores India’s commitment to regulating the burgeoning cryptocurrency market, it leaves Bybit’s compliance status in a state of ambiguity.
Why such a hefty fine?
Bybit’s troubles began when it was found operating without securing mandatory registration under the Prevention of Money Laundering Act (PMLA).
According to the Financial Intelligence Unit (FIU) of India, Bybit is classified as a ‘reporting entity’ due to its services in the digital asset space.
In December 2023, the FIU identified several crypto exchanges for non-compliance with local anti-money laundering laws but Bybit was notably not among the listed exchanges.
However, the exchange continued to expand its operations in India without the required registration, prompting the FIU to take action.
Indian authorities, through the Ministry of Electronics and Communication Technology (MEITY), blocked Bybit’s websites under the Information Technology Act, 2000, effectively halting Bybit’s operations in India.
However, the suspension came after Bybit had already announced a pause in its services due to “recent developments with Indian regulators,” hinting at prior knowledge of regulatory scrutiny.
Bybit has applied for a VDASP license in India
Amidst these challenges, Bybit has been actively working towards rectifying its status in India. The exchange has applied for a Virtual Digital Asset Service Provider (VDASP) license, aiming to legally operate within India’s crypto market.
This application was completed back on June 26, 2024, indicating a proactive approach to meet regulatory requirements.
Vikas Gupta, Bybit’s country manager for India, expressed optimism about obtaining a full operations license in the coming weeks, suggesting an expectation of smoother regulatory waters ahead.
Initially, there were announcements from Bybit suggesting successful registration and fine settlement, but these were later retracted, leaving the public and stakeholders in limbo regarding the exact compliance status of Bybit in India.
India’s approach indicates a strong push towards ensuring that all financial entities, including those dealing in cryptocurrencies, adhere strictly to anti-money laundering and counter-terrorism financing norms.
Other major exchanges like Binance, KuCoin, and OKX have also faced similar regulatory actions for non-compliance with PMLA and other financial laws.
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