Toomey Questions FDIC Over 'Choke Point'-esque Crackdown of Banks and Crypto

Sen. Pat Toomey, R-Pa., is pressing the Federal Deposit Insurance Corp. on its stance toward banks involvement in cryptocurrency, questioning if the agency is "improperly" deterring banks from offering cryptocurrency services.  

In a letter obtained by American Banker to Martin Gruenberg, the acting chairman of the FDIC, Toomey, the ranking GOP member of the Senate Banking Committee, says that his office has received complaints that staff in the agency's Washington headquarters have urged FDIC regional offices to send letters to banks who've asked to dip their toes into offering some kind of crypto-related services, asking those banks to refrain from expanding their relationship with crypto-related companies. 

"Given the FDIC's involvement under your leadership in the Obama administration's notorious Operation Choke Point, which sought to coerce banks into denying services to legal yet politically disfavored businesses, it is important to better understand the actions the FDIC is now taking and the legal basis for them," Toomey said. 

In response to Toomey's letter, the FDIC said that asking institutions to delay or refrain from engaging in cryptocurrency-related activities are "necessary and appropriate" actions, "given the risks readily apparent in the crypto-asset markets."

"The FDIC is acting consistent with longstanding legal authorities to ensure that banks engaging in crypto-related activities are doing so in a safe and sound way that protects consumers," the agency said. "This may involve the FDIC requesting that an institution delay initiating or refrain from expanding crypto-related activities until supervisory feedback is taken into account."

The FDIC, along with the Office of the Comptroller of the Currency, has asked banks to check in with the agency if the bank is currently or planning on pursuing any crypto-related activities. Banking agencies have lauded their cautious approach to crypto as digital assets experienced turbulence in markets earlier this year, saying that regulators' trepidation to letting banks get more involved with crypto helped insulate the traditional financial sector from that turmoil. 

Banking groups in Washington, meanwhile, are starting to push for a larger role for banks in the digital assets landscape. 

Toomey's letter is also the latest in a series of high-profile efforts by lawmakers to pressure regulators to set more explicit rules around how banks interact with cryptocurrency, reflecting the increasing polarization between Republicans and Democrats on the issue.