Judge criticises FDIC for redacting crypto pause letters

A US federal judge has criticised the Federal Deposit Insurance Corporation (FDIC) for its handling of redactions in crypto-related “pause” letters sent to financial institutions.

The criticism came during a Coinbase-backed Freedom of Information Act (FOIA) lawsuit.

"lack of good-faith effort" in making "nuanced redactions," Washington, DC, district court judge Ana Reyes questioned the FDIC’s actions in a ruling on December 12.

Judge Reyes emphasised that the FDIC cannot simply redact everything except for articles or prepositions.

She ordered the FDIC to revise the redactions and resubmit the letters by January 3, 2024.

The judge further noted that the FDIC should be prepared to defend each redaction made.

The “pause letters,” released earlier this month, revealed that the FDIC had reached out to 23 financial institutions regarding their involvement with crypto.

In some cases, the FDIC instructed firms to halt crypto-related activities or avoid expanding crypto services.

The heavily redacted letters included sections where entire pages were obscured, raising concerns about the FDIC’s transparency.

“What is the FDIC working so hard to hide?” expressed Coinbase’s legal chief, Paul Grewal, on social media, showing his frustration.

This follows a claim by Grewal that the letters supported industry rumors of an attempt by the Biden administration to limit the crypto sector’s access to financial services, known as “Operation Chokepoint 2.0.”

In a December 6 post, Grewal argued that the redactions were not just a matter of speculation but an ongoing effort by the FDIC to conceal information.