Paul Grewal, Coinbase's Chief Legal Officer, said that without reforms, any industry could become a target of debanking efforts. He made this statement during a February 6 hearing titled "Operation Choke Point 2.0: The Biden Administration’s Efforts to Put Crypto in the Crosshairs."
"Today, I want to shed light on the systematic effort to debank the American crypto industry, and then deny it the legal protections afforded by Congress and the courts," said Grewal. "While crypto is the current target, any legal American industry could be next if regulators continue to use banking services as a political weapon. This attack on banking services spans multiple agencies and dates back more than four years."
The House Financial Services Subcommittee on Oversight and Investigations held the hearing to investigate regulatory actions under previous administrations that led to individuals and firms associated with the digital asset industry losing access to banking services. According to a memo, the original iteration of Operation Choke Point occurred under the Obama administration and involved regulators pressuring banks into cutting off services to "disfavored industries."
Grewal testified that the Federal Deposit Insurance Corporation (FDIC) "began sending dozens of letters to senior members of financial institutions" in March 2022, instructing them to halt all activities related to digital assets. He said the FDIC then required institutions to self-report any proposed crypto-related activities but also issued a statement saying that "banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation." Grewal argued that the FDIC's actions demonstrate "the lack of transparency and accountability in regulatory practice."
On February 5, according to a press release, the FDIC released 175 documents pertaining to its supervision of banks involved in crypto-related activities. FDIC Acting Chairman Travis Hill said that these documents reveal that the FDIC's actions towards banks "sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward" with crypto-related activities, causing many banks to "simply stopped trying." Hill indicated that moving forward, the FDIC will revise its approach to crypto-related supervision.
Prior to joining Coinbase, Grewal served as Vice President and Deputy General Counsel at Facebook and was a U.S. Magistrate Judge for the Northern District of California.
