American banks interested in offering services via public blockchain networks have been dissuaded by the Federal Deposit Insurance Corporation (FDIC), according to documents revealed by Coinbase through a Freedom of Information Act (FOIA) request.
The documents included a series of previously redacted correspondences between the FDIC and various member banks. Notably, a letter sent in March 2022 highlighted the FDIC’s concerns after learning that a member bank intended to introduce a “Bank Digital Deposit” program utilizing a public blockchain. Although the specific blockchain was kept confidential, it is inferred to involve widely-used platforms like Ethereum.
In the correspondence, the FDIC criticized the bank for opting for a public blockchain rather than a private, permissioned network. This stance reflects the regulator’s apprehension about the transparency and uncontrolled nature of public blockchains, where activities are fully accessible and cannot be manipulated by third parties. In contrast, private blockchains, such as those utilized for central bank digital currencies, have restrictions on user access and operational purposes.
The FDIC mandated the New York bank to undergo a thorough review process before launching any projects on public blockchains. Additional letters unveiled similar instructions for banks to pause any cryptocurrency-related services, illustrating a broader regulatory resistance against crypto activities.
Coinbase’s Chief Legal Officer, Paul Grewal, commented that these discoveries align with accusations of a coordinated initiative by the Biden administration against the cryptocurrency sector, termed “Operation Chokepoint 2.0.” Grewal emphasized that the letters demonstrate a concerted effort to curb various crypto operations.
For further details, refer to the FDIC’s official website.
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