On October 18, 2023, Coinbase, a leading cryptocurrency exchange, took an assertive step towards securing regulatory clarity in the United States by submitting two new Freedom of Information Act (FOIA) requests. The significance of these requests cannot be overstated, particularly in light of the complex and often opaque regulatory framework that governs digital assets. By targeting the Federal Deposit Insurance Corporation (FDIC) and involving History Associates Incorporated as a filing agent, Coinbase aims to shed light on regulatory practices that affect its operations and those of other digital asset companies.
The first of Coinbase’s requests specifically addresses a concerning 15% deposit cap alleged to be enforced on banks that harbor relationships with digital asset firms. This regulatory constraint, reportedly impacting entities like Signature Bank, Customers Bank, Cross River Bank, Western Alliance Bank, and Silvergate Bank, poses potential challenges to the banking services available to the cryptocurrency sector. Coinbase’s chief legal officer, Paul Grewal, indicated that the request seeks documentation of discussions among FDIC members, Federal Reserve officials, and those from the Treasury’s Office of the Comptroller of the Currency. The inclusion of communication logs dating back to June 2022 highlights Coinbase’s pursuit for transparency regarding the decisions and rationale that underpin such significant regulatory moves. If the FDIC opts to withhold any relevant information under FOIA exemptions, Coinbase has stipulated a necessity for detailed explanations, demonstrating the exchange’s commitment to accountability.
Coinbase’s second request appears to complement its first by focusing on the treatment of FOIA requests by regulatory bodies. By seeking FOIA logs from the FDIC and OCC for the period between January 1, 2022, and October 1, 2023, Coinbase aims to engage in a meta-analysis of how regulatory agencies process information requests. This approach not only underscores the importance of transparency in government operations but also underscores Coinbase’s strategic intent to track how information relating to digital assets is disseminated or withheld. By identifying patterns in regulatory behavior, Coinbase hopes to glean insights into how responses to inquiries, especially those related to cryptocurrency regulations, are orchestrated.
Coinbase’s proactive stance illuminates broader tensions between the burgeoning cryptocurrency sector and established financial regulatory frameworks. With figures such as Custodia Bank CEO Caitlyn Long emphasizing the “lawlessness” of federal banking regulators towards banks serving crypto clients, the narrative surrounding regulatory clarity has become increasingly important. Coinbase’s requests are distinguishable from previous inquiries submitted to the Securities and Exchange Commission (SEC) in July 2023, which focused on the regulator’s enforcement practices and the designation of digital assets as securities. These prior efforts reflect a long-standing struggle for clarity and fairness in enforcement as the regulatory landscape continues to evolve.
Coinbase’s legal maneuvers extend not only to FOIA requests but also include significant litigation against the SEC. On the same day as their latest FOIA filings, Coinbase filed a motion for partial summary judgment in an ongoing lawsuit against the SEC. The objective is to compel the release of internal documents that elucidate the agency’s enforcement strategies regarding the cryptocurrency sector. This legal approach reflects a broader dissatisfaction with how the SEC has managed its responsibilities, including alleged delays in responding to FOIA requests.
As Coinbase navigates the challenging waters of regulatory compliance, its efforts serve as an important touchstone for the entire cryptocurrency industry. By advocating for transparency and accountability through FOIA requests, Coinbase not only seeks to defend its own interests but also champions the necessity for clearer regulatory guidelines that would benefit the broader crypto ecosystem. As the dialogue between the cryptocurrency sector and regulators continues to unfold, the outcome of Coinbase’s initiatives may well shape the future of digital asset regulation in the United States and beyond, reinforcing the need for greater clarity and fairness in governance.
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