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U.S. federal deposit insurer allegedly deterring banks from doing business with crypto firms

The Federal Deposit Insurance Corporation (FDIC), one of the two federal agencies insuring savings in American depository institutions, may be asking banks to refrain from providing services or extending credit to cryptocurrency companies, Republican Senator Pat Toomey alleged. See related article: New US bill to give CFTC oversight of cryptocurrencies may speed up crypto legislation […]

By Pradipta Mukherjee

From the Forkast crypto archive

WASHINGTON, DC – AUGUST 03: Sen. Pat Toomey (R-PA) speaks at a press conference on taxes at the U.S. Capitol Building on August 03, 2022 in Washington, DC. Republican members of the Senate Finance Committee held the news conference to discuss what they believe the Inflation Reduction Act of 2022 lacks and how it will not help inflation in the United States. (Photo by Anna Moneymaker/Getty Images)

The Federal Deposit Insurance Corporation (FDIC), one of the two federal agencies insuring savings in American depository institutions, may be asking banks to refrain from providing services or extending credit to cryptocurrency companies, Republican Senator Pat Toomey alleged.

See related article: New US bill to give CFTC oversight of cryptocurrencies may speed up crypto legislation in other markets   

Fast facts

  • In a letter seeking explanation, U.S. Sen. Pat Toomey has asked Martin Gruenberg, director and acting chairman of FDIC, to clarify if any of its officials have instructed that its regional offices ask banks to refrain from engaging with cryptocurrency companies.
  • “According to whistleblower communications that we have corroborated, personnel in the FDIC’s Washington, D.C. headquarters are urging FDIC regional offices to send letters to multiple banks requesting that they refrain from expanding relationships with crypto-related companies, without providing any legal basis for sending such letters,” Toomey wrote in his letter. 
  • Whistleblower reports have also alleged that the FDIC may be misusing its supervisory powers to prevent banks from extending credit to crypto-related companies. 
  • The move comes after the U.S Federal Reserve published on Monday  guidelines on how crypto banks could be granted “master accounts” that are needed to transact directly with the Fed and the broader global banking system. The new guidance is expected to streamline the application process for crypto firms.
  • Angelina Kwan, chief executive officer (CEO) of Stratford Finance, told Forkast that cryptocurrencies have developed very quickly as an asset class and its adoption has been equally quick. “And I think the resources of the governments as well as regulators around the world have been strained because of it,” Kwan said. 
  • Interestingly, the FDIC had issued a letter in April directing all FDIC-supervised institutions “engaging in crypto-related activities” to notify the agency and provide information that would allow the FDIC to engage with the institution regarding related risks. 

See related article:  Hold onto your crypto bags, the regulators are coming