Coinbase CLO Paul Grewal Calls Out FDIC Over Incomplete FOIA Responses

Paul Grewal, Chief Legal Officer (CLO) of Coinbase, raised concerns regarding the Federal Deposit Insurance Corporation’s (FDIC) handling of Freedom of Information Act (FOIA) requests. Grewal’s remarks came after Coinbase encountered redacted and incomplete responses from the FDIC, which raised questions about the agency’s transparency.

Coinbase CLO Paul Grewal Calls Out FDIC

In a series of posts on X, Coinbase CLO Paul Grewal has outlined concerns about the FDIC’s process in responding to FOIA requests. He claimed that the FDIC did not perform full-text searches in its Regional Automated Document Distribution (RADD) database. In addition, the agency reportedly denied the requests for documents that were stored in collaboration tools like Microsoft Teams, thus restricting the range of the disclosed data.

Coinbase CLO Paul Grewal also pointed to specific guidelines in the FDIC’s instructions that required setting some documents as deliberative or attorney-client privileged, which he argues was done to avoid sharing them. Additionally, Coinbase found that at least 150 documents that are potentially related to the case were not included in the FOIA replies provided by the FDIC. Grewal pointed out these loopholes as a cause of concern in the agency’s accountability.

The FDIC representatives answered saying,

“Considering the increase in the scope of your requests, we shall need time to deliberate on your communication and provide our response.”

Concerns About FDIC’s Use of “Pause Letters”

The controversy includes the FDIC’s use of “pause letters” sent to banks, urging them to halt services to cryptocurrency clients. Coinbase alleges these letters were later redacted heavily under FOIA Exemption 8, which protects sensitive financial regulatory matters. 

Paul Grewal claims the exemption was misused to hide information that was not initially considered confidential.

The letters allegedly focused on issues like cryptocurrency lending, stablecoins and blockchain based payment systems. Coinbase Chief Legal Officer Paul Grewal noted that such actions posed legal risks for compliant crypto businesses since banks were not provided with explanations for the restrictions.

Operation Choke Point 2.0 Allegations Resurface

This has brought back the conversation about the ‘Operation Choke Point 2.0’ which was a term used to explain the claims of regulators to deny banking services to cryptocurrency companies. The critics have ascribed the FDIC and other regulators to covertly forcing the banks to shy away from processing crypto transactions using the cover of compliance.

The letters, which were written in 2022 and 2023, showed that the FDIC instructed the banks to cease services on different cryptocurrency products but had not given further instructions afterwards. Critics have claimed that this has slowed down innovation and prevented the expansion of financial services within the crypto industry.

Similarly, some of the comments made by Coinbase CLO Paul Grewal have elicited reactions from other legal and political personalities such as Senator John E. Deaton. Deaton called for more supervision, and noted that the danger of officials discretionarily cutting off access to financial networks cannot be overlooked.

The Coinbase CLO also pointed out that the FDIC should answer clearly as the information disclosed should be made public to ensure that all industries are treated equally, including the cryptocurrency industry.