The newly unredacted correspondences include 23 letters released last month, along with two additional ones. A March 2022 letter from the FDIC’s New York office highlights the agency’s concerns over a member bank’s plans to launch a “Bank Digital Deposit” program on a public blockchain. While the blockchain’s name remains redacted, the FDIC’s stance was clear: the bank would need to undergo a detailed review process before proceeding with any such product.
The FDIC’s preference for private, permissioned blockchains—those controlled by select administrators and restricted in access—underscores its skepticism toward decentralized networks. Unlike private blockchains, public ones offer transparency and immutability, as they cannot be altered by third-party administrators. These attributes, while fundamental to the ethos of blockchain technology, appear to be a sticking point for the regulator.
Other documents reveal that the FDIC has not limited its scrutiny to public blockchains. The agency has instructed member banks to halt services related to buying and selling Bitcoin and to “pause all crypto asset-related activity.” This aligns with growing concerns from crypto advocates about regulatory efforts to stifle innovation in the industry.
Operation Chokepoint 2.0?
Coinbase Chief Legal Officer Paul Grewal has pointed to these documents as further evidence of what has been dubbed “Operation Chokepoint 2.0,” an alleged coordinated effort by the Biden administration to restrict crypto activities through banking regulations. This strategy, named after a similar initiative during the Obama administration targeting industries like firearms dealers and payday lenders, is said to be aimed at marginalizing the crypto industry by limiting its access to traditional financial systems.
“They show a coordinated effort to stop a wide variety of crypto activity,” Grewal stated on X (formerly Twitter).
Implications for Blockchain and Banking
The FDIC’s actions highlight the challenges facing the integration of public blockchain technology into traditional banking services. While private blockchains may align more closely with regulatory preferences, public blockchains offer unique benefits like decentralization, transparency, and resilience against tampering.
This regulatory pushback raises questions about the future of innovation in the U.S. financial sector. Critics argue that discouraging the use of public blockchains could hinder competition and push innovation to jurisdictions with more accommodating policies.