The Fight for Transparency: Coinbase Takes on the FDIC
If you’re trying to track why American crypto firms keep running into bureaucratic walls, the latest courtroom battle between Coinbase and the Federal Deposit Insurance Corporation (FDIC) is a window into the storm. The world’s second-largest crypto exchange has accused one of America’s most powerful financial regulators of deliberately obstructing access to key disclosure about why so many crypto companies seem to hit dead ends when seeking basic banking services.
This fight centers on so-called “Operation Chokepoint 2.0″—the alleged outgrowth of a controversial Obama-era policy aimed at limiting banking for politically or economically disfavored sectors. In Coinbase’s telling, the FDIC secretly pressured banks to block crypto firms from accounts, effectively forcing much of the industry to operate without access to traditional financial infrastructure.
Suspicion flared into open legal warfare when Coinbase, desperate for transparency, filed a Freedom of Information Act (FOIA) lawsuit seeking internal FDIC communications—especially the now-infamous “pause letters” sent to banks ordering them to stop serving crypto clients. According to a survey by the Alternative Investment Management Association (AIMA), over 75% of crypto funds have trouble obtaining banking access, a staggering figure that turns opaque bureaucracy into a market-shaping force.
What has emerged so far bears a resemblance to regulatory dark arts. After four court orders and six separate government disclosures, swathes of internal documents were produced, but many were so heavily redacted as to be almost meaningless. Coinbase’s legal chief, Paul Grewal, did not mince words: “We can’t and won’t stand for it.” In his latest filings, Grewal asks for court testimony from FDIC officials and full records of FOIA denials issued between 2020 and 2024.
The FDIC, for its part, has excused its resistance to disclosure by citing FOIA Exemption 8—meant to protect bank examination materials—yet applied it so broadly that both factual and analytic material vanished from public view. This has left watchdogs asking whether the true intent is to shield legitimate supervisory processes or to stifle an entire emergent industry.
The Ghost of Chokepoint: Regulatory Tactics Old and New
There’s a whiff of historical déjà vu in the air. The original Operation Chokepoint—inaugurated over a decade ago—infamously strong-armed banks into dropping clients in marginalized sectors, from payday lenders to firearms manufacturers. “Many see echoes of that playbook in these newly exposed strategies targeting the crypto sector,” notes former FDIC counsel Karen Petrou. Even though the FDIC claims its crypto stance is about stability, not prejudice, policymakers and industry advocates aren’t buying it.
In the current iteration, Coinbase and its supporters argue that internal FDIC guidance notified banks of regulatory “concerns” around digital assets, pushing them to halt all connections. Newly revealed documents, though partially redacted, reinforce suspicions that regulators crossed a line from prudent caution into deliberate marginalization.
Why should this concern you, the everyday reader? Because the collision of old-guard regulators and digital disruptors is shaping how—and if—Americans can access, innovate with, and invest in new financial technologies. When three-quarters of an entire financial sector is cut off from banking services, it is not only those businesses at risk, but the promise of more accessible, competitive financial systems.
“Every time regulatory opacity is allowed to linger, the American consumer pays the price in missed innovation, higher costs, and fewer choices.”
Pressure to contain crypto risks is not groundless. Harvard economist Kenneth Rogoff emphasizes the volatility and systemic uncertainty digital currencies may introduce. Still, as Yale Law professor Reva Siegel has observed, using informal, secretive policies undermines rule-of-law principles essential to public trust, whether in finance or any other sector. It’s one thing to regulate aggressively; quite another to do so in the shadows, unaccountable to courts or the public.
Innovation at a Crossroads: Regulatory Gatekeeping or Consumer Protection?
At the heart of this legal and ethical stand-off lies an important debate over who gets to decide the direction of American innovation. The FDIC’s refusal to grant Coinbase a public crypto banking charter—ostensibly due to concerns about systemic risk and consumer protection—has become a lightning rod. Each time an agency invokes caution, one must ask if it’s actually serving the broader public or simply safeguarding entrenched interests.
Beyond that, crypto’s reputation for risk should not obscure the broader need for modernized regulation. According to a 2023 Pew Research Center survey, nearly a fifth of Americans under 40 have invested in, traded, or used digital assets in some form. That is millions of voters, innovators, small business owners and entrepreneurs who will shape the next era of economic growth—provided government doesn’t lock them out.
A closer look reveals that international competitors, from London to Singapore, are moving rapidly to harmonize rules and welcome responsible innovation. Keeping the U.S. in regulatory limbo not only penalizes domestic startups but also risks ceding leadership in the global fintech race. “We need transparency, not stonewalling. Debate, not diktat,” urges Sheila Warren of the Crypto Council for Innovation.
Progressive voices have long warned that bureaucratic inertia and anti-competitive practices can morph into accidental—or intentional—gatekeeping. Ensuring that regulatory frameworks are both robust and adaptive is core to progressive values of equity, transparency, and economic empowerment.
The episode unfolding between Coinbase and the FDIC should serve as a wake-up call: Democratic institutions cannot afford to choose secrecy over sunlight. For the sake of justice, innovation, and the public good, it is time to demand honesty, oversight, and a new social contract on how finance meets technology. Any less, and we risk building walls where there could be bridges.
