Coinbase CLO Paul Grewal Calls Out FDIC Over Incomplete FOIA Responses

Paul Grewal, the top legal executive at Coinbase, expressed worries over how the Federal Deposit Insurance Corporation (FDIC) manages requests under the Freedom of Information Act (FOIA). These concerns arose following instances where Coinbase received incomplete or redacted responses from the FDIC, leading to questions about the agency’s openness and transparency.

Coinbase CLO Paul Grewal Calls Out FDIC

Through a series of posts on X, Paul Grewal, Coinbase’s Chief Legal Officer, has raised issues about the FDIC’s approach to handling Freedom of Information Act (FOIA) requests. He suggested that the FDIC failed to carry out comprehensive text searches within its Regional Automated Document Distribution (RADD) system. Furthermore, it was alleged that the FDIC declined requests for documents held in collaboration tools such as Microsoft Teams. This action potentially narrows the scope of the data made available to the public.

Paul Grewal from Coinbase’s Legal Operations also highlighted certain guidelines within the FDIC’s instructions that suggested certain documents be marked as deliberative or attorney-client privileged, which he believes was done to prevent their disclosure. Furthermore, Coinbase discovered around 150 documents that could be relevant to the case were missing from the FOIA responses given by the FDIC. Grewal raised these inconsistencies as a concern regarding the agency’s transparency and accountability.

The FDIC representatives answered saying,

Given the growing complexity of your messages, let’s take some time to carefully review them and get back to you with a suitable response.

Concerns About FDIC’s Use of “Pause Letters”

The disagreement involves the FDIC’s practice of sending “pause” letters to banks, advising them to temporarily suspend services for cryptocurrency customers. Coinbase claims these letters were significantly redacted later on under FOIA Exemption 8, which safeguards confidential financial regulatory issues.

According to Paul Grewal, the exemption was unfairly utilized to conceal details that were not originally deemed as secret or private.

In simpler terms, the letters under discussion seemed to address matters concerning cryptocurrency lending, digital currencies known as stablecoins, and payment systems built on blockchain technology. Paul Grewal, Coinbase’s Chief Legal Officer, pointed out that these actions presented potential legal risks for crypto companies following regulations, since banks were not given reasons for the restrictions imposed.

Operation Choke Point 2.0 Allegations Resurface

The discussion about ‘Operation Choke Point 2.0’ has resurfaced, a term that previously referred to allegations made by regulators suggesting they would withhold banking services from cryptocurrency companies. Critics claim that the Federal Deposit Insurance Corporation (FDIC) and other regulatory bodies have secretly been pressuring banks to avoid handling crypto transactions under the guise of ensuring compliance.

In 2022 and 2023, a series of letters were issued, directing banks to halt their offerings on various cryptocurrency products. Following these instructions, no additional guidance was provided. This decision has been criticized, as it is believed that it has impeded innovation in the crypto industry and hindered the growth of financial services within this sector.

In a similar vein, remarks by Coinbase’s Chief Legal Officer Paul Grewal have sparked responses from various legal and political figures, including Senator John E. Deaton. Deaton emphasized the need for increased oversight and pointed out that the potential risk of officials arbitrarily disconnecting individuals from financial systems should not be underestimated.

The representative from Coinbase’s CLO emphasized the need for the FDIC to provide clear responses, as transparency with the disclosed information is crucial to maintain fairness across all sectors, particularly the crypto industry.

2025-01-11 07:27