By Mark Hunter
1 day agoFri Jun 28 2024 06:52:51
Reading Time: 3 minutes
- Coinbase has initiated a lawsuit against the SEC and the FDIC to obtain documents clarifying their cryptocurrency regulation stance
- The company has accused financial regulators of systematically hindering the cryptocurrency sector’s access to the federal banking system
- It has claimed the SEC and FDIC have withheld the requested documents and is suing to have the information released
Coinbase has launched a legal campaign against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) seeking to compel the pair to release documents that would clarify their regulatory stance towards the cryptocurrency industry. Coinbase’s legal action revolves around allegations that the SEC, FDIC, and other financial regulators have been systematically working to hinder the cryptocurrency sector’s access to the federal banking system. The move follows Coinbase’s efforts to acquire information through the Freedom of Information Act (FOIA), alleging that the SEC and FDIC failed to release the information.
Coinbase Demands Transparency
Coinbase requested documents pertaining to three SEC investigations into cryptocurrency firms and entrepreneurs from 2018 to 2024, including a recently concluded probe into Ethereum. The company hopes to gain insights into the SEC’s evolving views on digital assets through this information, but neither agency has furnished it with the requisite information, which Coinbase says contravenes its duty.
Coinbase summarised its position in a statement, in which it said, “For years, financial regulators – including the SEC, the FDIC, and the Federal Reserve Board – have used every tool at their disposal to try to cripple the digital-asset industry. We demand transparency from our federal government.”
Additionally, the company has sought details on “pause letters” sent by the FDIC to several banks between March 2022 and May 2023, letters which advised banks to halt any crypto-related activities pending further regulatory guidance on associated risks. The existence of these pause letters came to light following an October report by the FDIC’s Office of the Inspector General, which outlined the agency’s strategies regarding cryptocurrency-related risks.
Operation Chokepoint 2.0
The filing references the term “Operation Chokepoint 2.0,” which is used within the crypto community to describe perceived efforts by financial regulators to obstruct crypto firms’ access to essential banking services. This term is a nod to the original “Operation Chokepoint” from 2013, where federal regulators under the Obama administration targeted “high-risk” businesses, such as payday lenders, by denying them banking services.
Despite being entitled to this information under the FOIA, Coinbase claims that both the SEC and the FDIC have denied access to the requested documents. This refusal has prompted it to escalate the matter to the courts. The exchange also contends that the SEC has failed to provide a consistent interpretation of securities laws as they apply to digital assets, which has caused uncertainty and harm to industry participants.
200,000 Requests in Backlog
This isn’t the first instance of the SEC facing legal action for non-compliance with FOIA requests. Earlier this month, the American Securities Association (ASA) sued the SEC for access to documents related to its investigations into record-keeping practices at major Wall Street firms like Morgan Stanley, JPMorgan, and Goldman Sachs. In that case, the SEC denied the request, citing potential jeopardy to ongoing investigations and enforcement actions.
Coinbase’s lawsuits argue that the SEC and FDIC are using similar justifications for denying access, possibly to conceal whether top agency officials are employing coordinated pressure tactics to restrict the cryptocurrency industry’s access to federal banking services.
Obtaining the desired information may take time, however, as a recent report from the Government Accountability Office highlighted a substantial backlog of FOIA requests. In 2022, the backlog surpassed 200,000 requests for the first time, reflecting the growing demand for information from both companies and individuals.
