On December 6, in a joint status report filed in the U.S. District Court for the District of Columbia, the FDIC made public 23 “Pause Letters” that the FDIC issued to regulated, unnamed institutions to pause cryptocurrency-related activities. A research consultancy firm with experience in Freedom of Information Act requests, sued the FDIC in June, claiming the regulator “stonewalled” information requests for the letters. The exchange claimed that the letters could shed light on a potential “deliberate and concerted effort by the FDIC and other financial regulators” to “box crypto out of the banking system.”
According to the letters, which the FDIC issued to institutions in 2022 and are heavily redacted, the FDIC directed institutions to “pause all crypto-related activity” or temporarily “refrain from expanding” certain services for the time being as the FDIC determines “what, if any, regulatory filings will be necessary for a bank to engage in this type of activity.” The letters highlighted the FDIC’s concerns about safety and soundness, consumer protection, and compliance with existing regulations. The FDIC requested additional information from the banks to assist in its review and assessment of the proposed activities. Additionally, the letters emphasized the importance of coordination with other regulatory bodies and adherence to guidelines outlined in the Financial Institution Letter (FIL-16-2022), pertinent to crypto-related activities.
The joint status report noted that the research consultancy firm was dissatisfied with the redactions, particularly regarding information about digital-asset products or services and the extent of redactions in certain letters. The plaintiff argued that some redacted information should not be exempt under Exemption 8 of FOIA, which protects information related to bank examinations. The FDIC, however, maintained the redactions were appropriate and necessary to protect sensitive information. As a result, the parties requested the court conduct an “in camera” review of four letters to assess the appropriateness of the redactions, followed by a hearing to discuss the findings and potential resolutions.
