Whistleblower: government agency discourages banks from cooperating with crypto industry

Last Updated: 18 August 2022

An anonymous whistleblower has revealed that the US Federal Deposit Insurance Corporation (FDIC) is discouraging banks from doing business with legitimate crypto companies. Politician Pat Toomey made this known in a letter to the chairman of the FDIC.

Inappropriate action against cryptocurrency

Toomey suspects that the FDIC “may be taking improper action to discourage banks from doing business with legitimate cryptocurrency-related companies.”

Senator Pat Toomey is a member of the Senate Committee on Banking in the United States. The Federal Deposit Insurance Corporation is one of two agencies that provide deposit insurance to savers in US banks, the other being the National Credit Union Administration, which regulates and insures credit unions.

Head office asks regional offices to make crypto industry difficult

The letter describes whistleblower allegations. It reads:

“Staff at the FDIC’s Washington D.C. headquarters are urging the FDIC’s regional offices to send letters to multiple banks asking them to refrain from expanding relationships with crypto-related companies, without providing any legal basis for sending such letters.”

Lowering the status of crypto lending companies

In addition, Toomey wrote that there were reports that FDIC headquarters staff took the step of contacting staff in a regional office to urge them to lower the status of a loan to a crypto-related company:

“FDIC regional office staff reportedly interpreted FDIC headquarters’ involvement in this matter as an attempt to change the way loans to crypto-related businesses are generally classified and to discourage banks from making such loans in the future.”

Judging from Toomey’s letter, the alleged letters from the FDIC were sent on or around June 6. Toomey has asked Martin Gruenberg, the chairman of the FDIC, to confirm or deny the alleged activities by the end of the month. He also wants to know what the FDIC’s legal department thinks of the alleged activities.

FDIC previously pulled its hands off cryptocurrency

If this is true, then it is crazy for the FDIC to ask this of banks anyway. The American Federal Deposit Insurance Corporation clarified in a statement at the end of July that it only protects insured bank customers in the event that a bank goes bankrupt. With the emphasis on banks because they say that customers of crypto companies (who go bankrupt) are not covered by insurance and thus the responsibility of the FDIC.

By the way, the FDIC is under political pressure from Senator Elizabeth Warren to ‘protect consumers from the dangers of cryptocurrency.’

Banks must stop storing crypto

On 4 August, Bloomberg wrote that Warren, who like Toomey, sits on the Senate Banking Committee, is urging committee members and senators to sign a letter to the Office of the Comptroller of the Currency.

In this letter, they ask banks to stop providing services such as crypto-custody. Warren believes that regulators currently want to make it easier for Wall Street to enter the crypto market and “put the banking system at risk.

OCC must work with FDIC for alternative crypto approach

The letter urges the OCC to work with the Federal Reserve and the FDIC to develop an alternative cryptocurrency approach that adequately protects consumers and promotes the “safety and soundness of the banking system.”

“We are concerned that the OCC has not properly addressed the shortcomings of the previous interpretation letters and the risks associated with crypto-related banking activities, which have become more serious in recent months.”