Coinbase said it wants three top federal banking agencies to take certain steps to end alleged debanking in the crypto industry as the issue ramps up in Washington.
This week, Coinbase sent a letter to the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to affirm that banks can offer crypto execution and custody services directly or through established third parties as well as remove "unlawful, inconsistent impediments" for execution and custody services providers to partner up with banks.
"Coinbase is taking an important step towards ending the debanking of crypto by calling on @USOCC, @federalreserve, and @FDICgov to make clear that banks can engage in crypto activity and support the crypto community," said Faryar Shirzad, chief policy officer at Coinbase in a post on X on Tuesday. "For the last several years, US bank regulators have unilaterally and undemocratically barred banks from offering crypto services. This needs to end."
Specifically, Coinbase said an OCC interpretive letter should be rescinded and says it "imposes a de facto application process for novel bank activities without going through an appropriate rulemaking process and therefore violates the Administrative Procedure Act." That law governs how federal agencies develop and issue rules.
Coinbase also asked for the Fed and FDIC to confirm that state-chartered banks, subject to their jurisdiction, can provide custody and execution services for customers.
The Fed and OCC did not respond to a request for comment. An FDIC spokesperson said the agency doesn't comment on letters it receives.
The issue around crypto debanking has caught the ire of Republican lawmakers over the past few months amid calls for investigations and increased criticism from crypto firms who say they face challenges when looking to establish and maintain accounts in the U.S.
Congress will hold two hearings this week focused on debanking — one in the Senate Banking Committee on Wednesday and another in the House Financial Services Committee on Thursday. Coinbase Chief Legal Officer Paul Grewal is set to testify during the House hearing.
Attached to Coinbase's letter on Monday was a legal analysis by three law firms — Arnold & Porter Kaye Scholer LLP, Cleary Gottlieb Steen & Hamilton LLP, Wilmer Cutler Pickering Hale and Dorr LLP. The firms argued that the OCC's interpretive letter should be withdrawn and that banks should be allowed to provide and outsource crypto executive and custody services.
Coinbase previously lodged a lawsuit against the FDIC, through consultant firm History Associates, for allegedly cutting off the crypto industry from the banking sector. Since then, big bank CEOs have opened up about their struggles with crypto and last week Fed Chair Jerome Powell said banks can serve crypto customers as long as they can manage the risk when asked about risks associated with crypto.
It is unclear what stance the new Trump administration could take on the issue. Trump designated Travis Hill, former vice chair of the FDIC, to lead that agency as acting chair. Hill has said the FDIC should be clearer in how banks work with crypto.
In a note from TD Cowen on Monday, the investment bank's Washington Research Group lead Jaret Seiberg said banks will limit their exposure to crypto as long as anti-money laundering risks are at play.
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