- Coinbase says the SEC and FDIC are trying to undermine the crypto industry
- Coinbase asked the FDIC for the letters they sent to financial institutions asking them to indefinitely ‘pause’ crypto-related activities
- The exchange asked the SEC for documents about closed investigations to shed light on how the SEC views its authority
A United States-based cryptocurrency exchange platform, Coinbase, has sued the United States Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) for failing to comply with Freedom of Information Act (FOIA) requests.
The court cases were filed on June 27. Coinbase alleges that both the SEC and FDIC failed to comply with the FOIA requests submitted to the US District Court for the District of Columbia.
The allegations
The federal agencies are accused in Coinbase's lawsuits of trying to keep the cryptocurrency business out of the banking sector. The lawsuit seeks to draw attention to the FDIC's role by highlighting the necessity of accountability and transparency in the operations of federal agencies.
Coinbase filed FOIA requests to obtain information from federal financial regulators through the consulting firm History Associates. The SEC was the target of FOIA requests seeking information about the federal agency's position on Ethereum, particularly with regard to the blockchain's transition to a proof-of-stake (PoS) consensus mechanism.
Coinbase requested documents pertaining to Ethereum 2.0 and prior investigations involving Zachary Coburn and Enigma MPC.
The exchange cited FOIA requests pertaining to letters sent between March 2022 and May 2023 in its lawsuit against the FDIC. Financial institutions were directed by these letters to stop growing their crypto-related operations and to provide more details. The absence of a review period for these letters raised concerns and uncertainties, according to a report from the Office of Inspector General at the FDIC.
According to Coinbase, these letters are a component of Operation Choke Point 2.0, which aims to prevent cryptocurrency companies from obtaining necessary banking services. Citing the need to preserve sensitive information about the participating banks, the FDIC denied the FOIA requests.
In a long post on X, Paul Grewal, Coinbase’s chief legal officer, stated:
“Financial regulators have used multiple tools at their disposal to try to cripple the digital-asset industry. SEC has claimed sweeping authority, but refuses to provide any rules, let alone consistent or coherent ones. While FDIC pressured financial institutions to cut off the industry from the banking system. Today we filed lawsuits under the Freedom of Information Act for requests we made over a year ago seeking important information to which we, and the public, are entitled.
“We asked the SEC for documents about closed investigations to shed light on how the SEC views its newfound, sweeping (and unlawful) authority. One of those investigations, which only recently closed, focused on ETH, which the SEC publicly announced is not a security in 2018. And the other investigations have been closed for years. But the SEC stonewalled our requests.
“We asked the FDIC for the letters they sent to financial institutions asking them to indefinitely ‘pause’ crypto-related activities, an action that the FDIC’s own Office of Inspector General criticized for creating a “risk that the FDIC would inadvertently limit financial institution innovation and growth in the crypto space.” But the FDIC stonewalled our requests.
“This is no way to regulate. And this is no way to operate a transparent government. Today we demand better from our financial regulators. We appreciate the Court’s attention to these important issues and look forward to sharing updates in the future," he added.
