Coinbase Urges U.S. Bank Regulators to Clarify Crypto Rules, End "Debanking" Practices
Coinbase, a leading U.S. cryptocurrency exchange, is escalating its efforts to address what it calls the "debanking" of the crypto industry. In a letter to top banking regulators, Coinbase is demanding clearer guidelines on how banks can engage with crypto firms, arguing that current practices are stifling innovation and hindering the growth of the digital asset sector.
The Fight for Clarity: Coinbase Challenges Banking Regulators
The letter, addressed to the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), calls for the affirmation that banks can offer crypto execution and custody services, either directly or through third-party partnerships. It also seeks the removal of what Coinbase describes as "unlawful, inconsistent impediments" to such services.
"For the last several years, US bank regulators have unilaterally and undemocratically barred banks from offering crypto services. This needs to end," stated Faryar Shirzad, Coinbase's Chief Policy Officer, in a post on X.
Targeting the OCC: A Call to Rescind a Controversial Letter
Coinbase specifically targets an OCC interpretive letter, arguing that it imposes a "de facto application process" for novel bank activities without proper rulemaking, thus violating the Administrative Procedure Act. The company also requests that the Fed and FDIC confirm that state-chartered banks under their jurisdiction can provide custody and execution services for crypto customers.
Debanking: A Shadow War on Crypto?
The issue of "crypto debanking" has been a point of contention for several years, with some industry participants alleging a coordinated effort by government agencies to cut off the crypto sector from the traditional banking system. This debate has recently intensified, with Republican lawmakers calling for investigations and crypto firms voicing their frustrations over the challenges of securing and maintaining bank accounts.
Coinbase itself previously sued the FDIC, alleging the agency was pressuring banks to sever ties with crypto companies. The FDIC has consistently denied these allegations, stating that banks are neither prohibited nor discouraged from serving any specific customer type within the bounds of law and regulation.
Congress Takes the Stage: Hearings on Debanking This Week
This week, the issue will be front and center in Congress, with hearings on debanking scheduled in both the Senate Banking Committee and the House Financial Services Committee. Coinbase's Chief Legal Officer, Paul Grewal, is set to testify before the House committee.
Attached to Coinbase's letter was a legal analysis by three prominent law firms, arguing for the withdrawal of the OCC's interpretive letter and for banks' freedom to provide and outsource crypto services.