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Coinbase sues SEC and FDIC for information related to cryptocurrency regulation
Coinbase is launching a new legal offensive against the Securities and Exchange Commission and the Federal Deposit Insurance Corporation to procure documents related to the agencies’ approaches to regulating cryptocurrencies, FOX Business has learned.
According to lawsuits filed Thursday In a U.S. District Court in Washington, D.C., the largest U.S. cryptocurrency exchange has sued both regulators seeking access to internal records and to shed light on what it describes as a “deliberate and concerted effort by the SEC, FDIC, and other financial regulators” to pressure banks to deny cryptocurrency firms access to the federal banking system.
“For years, financial regulators – including the SEC, FDIC and Federal Reserve Board – have used every tool at their disposal to try to cripple the digital asset industry,” a Coinbase spokesperson said in a statement to FOX Business. “We demand transparency from our federal government.”
The SEC declined to comment. The FDIC did not immediately respond to a request for comment.
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In this illustration taken on March 4, 2022, a representation of the cryptocurrency is seen in front of the Coinbase logo.
The move follows Coinbase’s attempts to retrieve information through the Freedom of Information Act regarding three SEC investigations into cryptocurrency companies and entrepreneurs between 2018 and 2024, including its recently closed investigation into the Ethereum blockchain network. The exchange hopes the requested information will give it a better understanding of the SEC’s evolving views on digital assets over the years.
Coinbase also requested details of so-called “pause letters” sent by the FDIC between March 2022 and May 2023 to a handful of banks asking them to suspend any cryptocurrency-related activity until it could provide further guidance on the risks associated with it .
The suspension letters were revealed following an October report from the FDIC’s Office of Inspector General that detailed the agency’s strategies related to risks associated with cryptocurrencies.
Coinbase says it was denied access to the information requested by both the SEC and the FDIC, even though it was legally entitled to do so under the Freedom of Information Act, which allows the public to request access to non-public documents from federal agencies.
The U.S. Securities and Exchange Commission (SEC) headquarters in Washington, DC, on January 28, 2021.
This is the second time this month that the SEC has been sued for failing to comply with FOIA requests. On June 6, the American Securities Association subpoenaed the agency for documents related to its investigations into recordkeeping practices at dozens of Wall Street Companies including Morgan Stanley, JPMorgan and Goldman Sachs.
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In that case, ASA was denied access as this could jeopardise similar investigations and enforcement actions against other companies.
According to Coinbase’s lawsuits, the SEC and FDIC are citing similar reasons to deny Coinbase the information it is seeking, including whether top agency executives are using coordinated pressure tactics to “throttle” the industry of $2 trillion in digital assets, taking it away from the lifeblood of the federal banking system.
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Coinbase is referring to so-called “Operation Chokepoint 2.0,” a colloquial term used by cryptocurrency industry participants to refer to what they see as a concerted effort by financial regulators to make it difficult or, in some cases, outright deny companies cryptocurrencies access to banking services they need to exist in the US economy. The “2.0” part is a nod to a 2013 enforcement initiative called “Operation Chokepoint” in which federal regulators Obama administration denied banking services to so-called “high-risk” businesses, such as short-term lending institutions, which charge consumers with high-interest short-term loans.
Other cryptocurrency industry players have said that financial institutions have limited or cut off access to digital asset pairing services.
On Wednesday, the founder of cryptocurrency exchange Shapeshift, Erik Voorhees, brought to X to complain that fintech firm Revolut had closed his account for “interacting with cryptocurrencies.”
Wyoming-based cryptocurrency bank Custodia is currently attractive the judge’s decision to allow the Federal Reserve power to deny it access to the so-called master account, which would allow the state bank to access the central bank’s liquidity lines and payment services.
Meanwhile, Coinbase hopes its lawsuits will help provide a clearer picture of the SEC’s thinking behind its enforcement action against the exchange, which is currently being litigated in a New York federal court as the SEC argues that Coinbase is violating securities laws by offering potential non-nominal titles in the form of cryptocurrencies on its platform.
Coinbase says the SEC has refused to articulate a coherent view on how securities laws should apply to digital assets, which is ultimately hurting industry participants.
However, the company may have to wait a long time to get the information it seeks. According to a recent report from the Government Accountability Office, there is a huge backlog of FOIA requests due to the increase in volume and depth of information sought by companies and individuals in recent years. The report shows that in 2022, the government-wide backlog of requests surpassed 200,000 requests for the first time.
Source of the original article: Coinbase sues SEC and FDIC for information related to cryptocurrency regulation