FDIC Concludes Multi-Year FOIA Battle Over Crypto Pause Letters
What if federal regulators were quietly instructing banks to freeze crypto-related activities behind closed doors? This scenario moved from allegation to documented reality as the Federal Deposit Insurance Corporation (FDIC) settled a high-stakes Freedom of Information Act (FOIA) lawsuit, agreeing to pay substantial legal fees and reform its disclosure practices.
The case, centered on so-called “pause letters” sent to financial institutions, highlights ongoing tensions between U.S. regulators and the cryptocurrency industry, potentially signaling a shift toward greater transparency under new leadership. The settlement, detailed in a joint status report filed on February 6, 2026, in federal court in Washington, D.C., resolves a dispute that began when Coinbase directed a records request through research firm History Associates Incorporated.
The FDIC had initially withheld dozens of documents, citing exemptions under FOIA, but a November 2025 court ruling by U.S. District Judge Ana Reyes determined the agency violated federal disclosure laws by applying blanket withholdings and excessive redactions.
This forced the release of letters that instructed banks to pause or limit planned or ongoing crypto activities, fueling accusations of “Operation Choke Point 2.0″—a purported coordinated effort by regulators including the FDIC, Federal Reserve, and Office of the Comptroller of the Currency (OCC) to restrict crypto firms’ access to banking services. The pause letters first came to light in an October 2023 report from the FDIC’s Office of Inspector General, which criticized the agency for using informal communications to influence bank behavior without clear supervisory standards.
Coinbase’s November 2023 FOIA request sought these records to uncover evidence of regulatory overreach, but the FDIC denied it, claiming the documents were exempt “by their very nature.” After History Associates filed suit in June 2024, the court issued four orders and oversaw six document productions, with Judge Reyes rebuking the FDIC for a “lack of good-faith effort” in its redactions.
Settlement Details and Policy Reforms
Under the agreement, the FDIC will pay $188,440 in full attorney’s fees to History Associates, marking a clear victory for transparency advocates in the crypto sector. The agency also commits to overhauling its FOIA processes, including:
- Adding language to staff training materials to “liberally construe” FOIA requests, ensuring broader access to public records.
- Explicitly stating it maintains no blanket policy of categorically withholding all bank supervisory documents under FOIA Exemption 8, which protects certain financial supervisory information.
- Conducting document-by-document reviews rather than type-based exemptions, as acknowledged in the FDIC’s own appeal-denial letter.
Industry Reactions and Broader Implications
The crypto community hailed the outcome as a milestone in combating perceived debanking efforts. Coinbase Chief Legal Officer Paul Grewal emphasized the revelations on X (formerly Twitter), stating, “The years of litigation were worth it. We successfully uncovered dozens of crypto ‘pause letters’—indisputable proof of OCP2.0 and the coordinated effort to sideline the industry.” Joe Ciccolo, founder and president of compliance firm BitAML, criticized the FDIC’s past practices in comments to Decrypt, saying, “Shame on the FDIC—they are supposed to exemplify transparency given their mandate to protect consumers and insure the public’s money.”
He further argued that oversight should be “transparent, risk-based, and grounded in clear supervisory standards, not informal pressure conveyed through cryptic ‘pause letters,’” warning that such actions erode trust in the financial supervisory framework. The term “Operation Choke Point 2.0” draws from an Obama-era initiative that targeted industries like gun dealers and payday lenders by pressuring banks to sever ties, raising concerns about politicized regulation.
This case’s resolution may bolster crypto’s push for equitable treatment, with potential ripple effects on market confidence—evidenced by past debanking incidents that limited fiat on-ramps for exchanges. However, uncertainties persist around the full societal impact, as the exact number of affected banks and long-term effects on crypto adoption remain undocumented in released records. How do you see this settlement shaping the future of crypto regulation and banking access in the U.S.?
Fact Check
- The FDIC agreed to pay $188,440 in legal fees to History Associates Incorporated following a court finding of FOIA violations related to crypto pause letters.
- Dozens of pause letters were revealed, instructing banks to halt or limit crypto activities, as detailed in the FDIC’s October 2023 Office of Inspector General report.
- U.S. District Judge Ana Reyes ruled in November 2025 that the FDIC improperly used blanket withholdings and redactions under FOIA Exemption 8.
- The settlement includes FDIC commitments to revise FOIA training and abandon categorical document exemptions for bank supervisory records.
- Coinbase’s November 2023 request initiated the process, leading to a June 2024 lawsuit and multiple court-ordered document releases over two years.
